problem statement and analysis for company

I  am in needing of  a problem statement and analysis for a company called Under Armour, I attached  example of how it  needs to be done and instructions. Knowledge of how to  be doing an analyze weighted matrix,cost analyses and  use of a fishborne diagram  is needed  for this. PLEASE READ AND FOLLOW INSTRUCTIONS  BEFORE BIDDING. 

Suggested Organization of BA 301 Final Paper

(I) Executive Summary

(II) Situation Analysis

a. Company mission, vision, and values

i. What they state they are

ii. Corporate actions which reflect their values or contradict them

iii. Corporate social responsibility

b. Business strategy and alignment with the vision

c. Stakeholders

i. Key stakeholders / stakeholder groups (a brief one – two sentence discussion of various important stakeholders and what their individual stakes are – a bulleted list works well for this discussion)

d. Financial Performance & Situation

i. 3-5 years financial performance (revenues, net income, key costs, operating cash flow, etc.

ii. Current financial situation (cash availability, debt levels, any relevant balance sheet items like major changes in inventory, or receivables)

iii. Comparison of key or relevant financial performance and financial situation (income statement and balance sheet) items with industry benchmarks or key competitors

iv. Is their financial performance / situation as strength or a weakness? Does it impose any limitations on the company or restrict their abilities in any way?

e. Industry trends, situation, and expectations

i. Discussion of recent industry-wide changes or trends and their impact on the company.

ii. Discussion of expected changes in the industry and how those may impact the company.

f. Competitive / market situation

i. Market share discussion

ii. SWOT and discussion of how strengths, weaknesses, opportunities, and threats impact the company or any limitations imposed by these factors

iii. Comparison of strengths and weaknesses to key competitors

g. Other key external factors impacting the company such as technology developments, regulatory changes, changes in CSR or societal expectations, reputation, legal issues, etc

(III) Problem Identification

a. This section should include brief discussions (ie. a paragraph for each) of all significant challenges, weaknesses, problems, or the company’s inability to take advantage of business opportunities you have found. For each, describe the issue and how it impacts the company and, if possible, give a brief description of key causes.

b. For the “main” problem you have identified, provide an extended discussion of the issue:

i. Nature of the issue

ii. How it impacts the company and what’s likely to happen if it isn’t resolved

iii. Whether or not it’s mission critical and why, urgent and why

iv. Formal Problem Statement

v. Thorough Root Cause Analysis

(IV) Identification of Alternative Solutions

a. This section should include a brief (1-2 paragraphs) discussion of the alternative solutions you have identified including a discussion of the solution itself, how it could help solve the problem, and brief discussion of Pros and Cons for the alternative.

(V) Evaluation of Alternative Solutions

a. Discussion of objective criteria for evaluation of alternatives

b. Comparison of how 3 – 5 alternative solutions meet these criteria

(VI) Discussion of Recommended Solution

a. Clear statement of the recommended solution

b. Cost – Benefit Analysis with discussion of key factors

c. Feasibility Analysis

d. Ethical Screen

i. Alignment of the proposed solution with company values

ii. Discussion of legal or ethical issues related to the proposed solution

iii. Discussion of key stakeholders and how they would be impacted by the proposed solution

(VII) Solution Implementation & Success Measurement

a. Implementation

i. Key steps involved in implementing the required solution

ii. Significant resources required

iii. Timeline

b. Monitoring and Measurement

i. Discussion of key criteria to be used to evaluate the success of the proposed solution

ii. Plan for monitoring improvements following start of implementation

1. Frequency

2. Milestones

3.

Expectations

BostonScientific
A SITUATION ANAYLSIS AND SOLUTION

Contents

Executive Summary

1
Situation Analysis 3
Company Overview 3
Business Strategy 3
Mission, Brand Declaration, Values 4
Mission 4
Brand Declaration 4
Values 4
Corporate Citizenship 4
Stakeholders 5
Performance 6
SWOT Analysis 7
Primary Competitors 7
Industries 8

Cardiovascular

8

Rhythm Management

8
MedSurg 8

Market

Share 9
Medical Device Manufacturing in the US 9
Stent Manufacturing in the US 9
Industry Outlook 10
Medical Device Manufacturing in the US 10
Stent Manufacturing in the US 10
External Factors Influencing Performance 10
Problem Analysis & Description 11
Problems 11
Litigation with Johnson & Johnson 11
Vaginal Mesh Lawsuits 12
Increase in Accounts Receivable Days Outstanding 12
Foreign Currency Fluctuations 13
Product Recalls 13
Declining Sales in

Coronary Stent

Systems and Cardiac Rhythm Management 14
Problem Statement 14
Assessing the Root Causes of the Problem 15
Declining Market Share in Coronary Stent Systems 15
Decline in Cardiac Rhythm Management Devices Average Selling Price 16
Supply Constrained 16
Over Dependence of CRM and Coronary Stent Sales 16
Competitors Get New Product to Market First 17
Solutions 18
Solution Analysis 18

Focus Acquisitions on

Other Core Businesses 18
Increase Funding for R&D in

Neuromodulation

18

Enter Diabetes Device

Market 19
Weighted Decision Matrix 20
Long Term Financial Impact 20
Short Term Costs 21
Potential Risk 21
Effect on Stakeholders 21
Business Strategy 21
Time to Implement 22
Recommendation 22
Ethical Screen 22
Cost Benefit Analysis 23
Feasibility 24
Implementation Plan 24
Success Metrics 25
Evaluation 25
Bibliography 26
Appendices 30
Appendix A 30
Appendix B 31
Appendix C 32
Appendix D 33
Appendix E 34
Appendix F 35

1

Executive Summary

Boston Scientific is a worldwide developer of medical devices. While Boston Scientific has remained active in innovative ideas and acquiring companies to expand their product portfolio, they have seen a steady decline in revenues every year since 2009. This paper will analyze how Boston Scientific arrived at their regressing financial progress, some solutions to increase revenues, and finally make a final suggest at the best solution for improving revenues – that Boston Scientific should increase the funding for research and development of their Neuromodulation division.

An overview of Boston Scientific’s business strategy including their mission, brand declaration, and values will be introduced along with key stakeholders of Boston Scientific’s actions. Understanding these elements will provide a better background of the problems Boston Scientific faces along with ensuring that any suggested solutions are acceptable to Boston Scientific’s business strategy and key stakeholders. An overview of Boston Scientific’s performance, markets in which it operates, market share and trends, weaknesses as identified by SWOT analysis, and external factors that affect performance will help put the problems Boston Scientific faces into perspective.

A fishbone diagram was used to uncover the root causes of operational losses, and uncovered root causes for many of the problems that Boston Scientific faces. A total of six problems were identified that put Boston Scientific’s future at risk:

· Litigation with Johnson & Johnson

· Vaginal Mesh Lawsuits

· Increase in Accounts Receivable Days Outstanding

· Foreign Currency Fluctuations

· Product recalls

· Declining Sales in Coronary Stent Systems and Cardiac Rhythm Management Devices

However, only the most urgent and mission critical problem will become the focus for the remainder of the paper; Declining Sales in Coronary Stent Systems and Cardiac Rhythm Management Devices. Five causes with potential solutions have been identified, but only solutions for over dependence of Coronary Stent Systems and Cardiac Rhythm Management devices were developed:

· Focus Acquisitions on Other Core Businesses

· Increase Funding for R&D in Neuromodulation

· Enter Diabetes Device Market

These solutions will be compared to one another using a weighted decision matrix which will indicate that increasing the funding for R&D in Neuromodulation will best address the problem while adhering to Boston Scientific’s business strategy. A cost benefit analysis for a four year period was done to explore the tangible and intangible costs and benefits; confirming that the intangible benefits outweighed the tangible costs. An ethical screen along with a feasibility analysis were done to further show the solution’s plausibility. The paper concludes with an implementation plan for the solution and a way to evaluate whether or not the solution was successful.

Situation Analysis

Company Overview

Boston Scientific Corporation is a worldwide developer, manufacturer and marketer of medical products that are used in a broad range of interventional medical specialties (Boston Scientific 2013 10-K). The products and technologies are used to diagnose or treat a wide range of medical conditions that include heart, digestive, pulmonary, vascular, urological, women’s health, and chronic pain conditions (About Us).

Boston Scientific has approximately 23,000 employees around the world, which includes a sales force in 40 counties (Locations). As of February 4, 2014 Boston Scientific operates 12 manufacturing facilities, 6 of which are in the United States; International manufacturing facilities include 3 in Ireland, 2 in Puerto Rico, and 1 in Costa Rica and accounted for the manufacturing of approximately 57% of the products sold worldwide (Boston Scientific 2013 10-K). Boston Scientific has gained a market presence in 100 countries (About Us), and international sales accounted for 47% of revenue in 2013 (Boston Scientific 2013 10-K), Japan accounted for 10% of international sales (

Annual

Report).

Business Strategy

Boston Scientific rebranded themselves in 2013, and developed the following Business Strategy focusing on five imperatives: Strengthen Execution to Grow Share, Expand into High

Growth

Adjacencies, Drive Global Expansion, Fund the Journey to Fuel Growth, and Develop Key Capabilities (Boston Scientific 2013 10-K).

Mission, Brand Declaration, Values

Mission

Boston Scientific is dedicated to transforming lives through innovative solutions that improve the health of patients (Annual Report).

Brand Declaration

Advancing science for life. Advancing: We push the boundaries of today’s innovations that lead to tomorrow’s medical solutions. Science: Our heritage of discovery drives our passion for transforming lives. For Life: We are committed to helping patients’ live healthier, longer lives (Annual Report).

Values

Caring, diversity, winning spirit, meaningful innovation, global collaboration, and high performance (About Us).

Corporate Citizenship

Boston Scientific feels it is their responsibility to act as a good corporate citizen in the communities where they live and work. They are focused on four major areas Education, Health, Employees, and Environment through the Boston Scientific Foundation (Corporate Citizen). This Foundation is working in neighborhoods around the US, to help expand access to quality health care and educational opportunities in underserved populations. Since 2002, they have donated more than $32 million to support innovative organizations that are making a difference for people of all ages (Boston Scientific Foundation).

Stakeholders

· Communities in which Boston Scientific operates – Boston Scientific encourages its employees to volunteer in the communities in which they work (Corporate Citizen).

· Employees – Boston Scientific offers high paying jobs to 23,000 people around the world, if Boston Scientific was to close its doors, these employees would be without jobs.

· Creditors – If Boston Scientific is unable to meet its debt obligations, their creditors would lose out on the income that is provided from interest on Boston Scientifics debt.

· Shareholders – If Boston Scientific’s stock performs badly, shareholders lose wealth.

· Hospitals and Doctors –depend on the devices that Boston Scientific makes to provide alternative treatment to drug therapy to their patients

· Patients and their Families – depend on Boston Scientific to create products that will improve a patient’s health, without the need of major surgery.

· Boston Scientific Foundation grantees – Boston Scientific donated $54 million in research and educational grants in 2013 (Annual Report).

· Pharmaceutical Companies – directly impacted by the products Boston Scientific makes as they give doctors and hospitals alternatives to their products.

· Competitors – Boston Scientific takes away market share from their competitors.

· Suppliers – Suppliers depend on Boston Scientific for their revenue stream. If Boston Scientific has lower orders, these companies’ revenues will suffer.

· Health Insurance Companies – Health insurance companies benefit from Boston Scientific devices as they improve the health of their subscribers, healthier subscribers result in less insurance payments which increases revenues.

· Group Purchasing Agents – The more products that Boston Scientific offers the better deals group purchasing agents can make with Boston Scientific, driving down the price they pay for products with Boston Scientific and their competitors.

· Federal Government – Boston Scientific pays a 2.3% excise tax on all medical devices sold, in 2013 this amounted to $73 million (Boston Scientific 2013 10-K).

Performance

When looking at Table 1 below, we see that revenues have decreased steadily over the last five years at an annual rate of 3.36%. Boston Scientific has had operating losses in three out of the last five years with the operating profits occurring in 2011 and in 2013. This has led to net losses in four out of the last five years, with 2011 being the only year to report a net profit.

Table 1. Select Income Statement items from the most recent 5yr period. Taken from

Morningstar.

Fiscal year ends in December. USD in

Billions except per share data.

2009-12

2010-12

2011-12

2012-12

2013-12

Revenue

8.188

7.806

7.622

7.249

7.143

Operating income

-0.894

-0.656

0.904

-3.868

0.120

Net income

-1.025

-1.065

0.441

-4.068

-0.121

Earnings per share

-0.68

-0.7

0.29

-2.89

-0.09

Cash and Cash equivalents have remained pretty constant since 2010 and had a balance of $217 million as of December 31, 2013. Accounts payable and other long-term liabilities have increased every year since 2010. Boston Scientific is paying down its long term debt as it has decreased every year since 2009. This has come at a cost to retained earnings however, as it too has decreased every year except 2011 (see Appendix A).

SWOT Analysis

Two SWOT Analyses of Boston Scientific were taken from different sources. The weaknesses identified in these analyses were different from each other. MarketLine identified overdependence on the matured Cardiac Rhythm Management (CRM) and Implantable Cardioverter Defibrillator (ICD) product lines. GlobalData identified litigation claims, product call backs, and declined operation performance as Boston Scientifics’ weaknesses. (For SWOT Analyses from MarketLine and GlobalData please see Appendix B).

Primary Competitors

Looking at Chart 1. Below, we can see that while Boston Scientific’s revenues have steadily decreased from 2009 to 2013, while most of their major competitors have had steady increases in their revenues. In 2012, Abbott Laboratories restructured and formed a separate company AbbVie (Abbott Laboratories 2013 10-K); a major portion of their pharmaceutical business is now done in this company, resulting in a steep drop of revenues in 2013 for Abbott Laboratories. (For a complete breakdown of medical device segments revenues for Abbott Laboratories and Medtronic see Appendix D.)

Chart 1. Boston Scientific’s revenues from 2009-2013 in comparison to its top competitors.

Revenues

taken from Morningstar.

Industries

Medical Device Manufacturing with products in 7 core business areas within 3 business divisions.

Cardiovascular

This division is comprised of products in Interventional Cardiology and Peripheral Intervention and was responsible for $2.867 billion in revenue or approximately 40% of Boson Scientifics Revenues in 2013. Coronary Stent (CS) Systems accounted for $1.177 billion in revenue or approximately 41% of this divisions sales and approximately 16% of Boston Scientifics total revenue in 2013 (Boston Scientific 2013 10-K).

Rhythm Management

This division is comprised of Cardiac Rhythm Management (CRM), and Electrophysiology and was responsible for $2.076 billion in revenue or approximately 29% of Boston Scientifics revenues in 2013. CRM products are comprised of implantable pacemakers and implantable cadioverter defibrillators (ICD) devices. CRM devices were responsible for $1.886 billion in revenue and accounted for 91% of this division’s revenue, and approximately 27% of Boston Scientific’s total revenue in 2013 (Boston Scientific 2013 10-K)).

MedSurg

This division is comprised of products in Endoscopy, Urology and Women’s Health, and Neuromodulation and was responsible for $2.298 billion in revenue or approximately 32% of Boston Scientifics revenue in 2013. Neuromodulation is the fastest growing business segment with revenues growing from $.367 billion in to 2012 to $.453 billion in 2013, an increase of 23% (Boston Scientific 2013 10-K).

Market Share

Medical Device Manufacturing in the US

The Medical Device Manufacturing in the US industry is estimated to have revenues of $37.6 billion in 2014, and had an annual growth rate of 3.6% from 2009-2014. Annual growth rates are estimated to be 7.1% from 2014-2019. Boston Scientific has an estimated 4.9% market share in this industry, with Medtronic as the industry leader with a 25.6% market share (Medical Device). Below we see in Chart 2 that the Cardiovascular Device segment accounts for roughly 11%, and Neuromodulation Devices account for roughly 7% of the Medical Device Manufacturing in the US industry. These are the segments in which Boston Scientific has gained most of its 4.9% market share (Medical Device).

Chart 2. This Chart shows the percentage of revenues that each device segment accounts for. Total Industry revenues in 2014 were estimated at $37.6 billion. Taken from IBISWorld.

Stent Manufacturing in the US

Stent Manufacturing in the US was estimated to have $2.2 billion worth of revenues in 2014. Between 2009 and 2014 this industry experienced annual growth rates of 1.8%, and is estimated to have annual revenue growth rates of 1.9% between 2014 and 2019. Boston Scientific has largest market share in this industry at 22%, with Medtronic (21.1%), and Abbott Laboratories (21.5%) not too far behind (Stent Manufacturing).

Industry Outlook

Medical Device Manufacturing in the US

Healthcare reform in the US, technological advances, and an aging population will drive this industry during the next five years. Revenue growth is expected to increase at an annualized rate of 7.1% to $52.9 billion. High-tech fields such as biotechnology and 3D printing will likely enable the development of new therapeutic and diagnostic product lines. The life cycle of this industry is seen as growing (Medical Device).

Stent Manufacturing in the US

Increased medical scrutiny about the safety and necessity of stenting is expected to dampen demand for industry products. However steady demand for angioplasty procedures, along with growing demand in emerging markets will keep this industry afloat. Revenue is expected to grow at annualized rate of 1.9% to $2.4 billion by 2019. This Industry’s life Cycle is declining (Stent Manufacturing).

External Factors Influencing Performance

Boston Scientific operates globally and deals with many different currencies. In 2013, foreign exchange fluctuations negatively impacted net sales by $156 million. Boston Scientific must get FDA approval for their products before they can sell a product on the open market. To sell in other markets of the world, they must also get approval from those nations governing bodies as well. It is unclear what impacts HealthCare Reform will have on Boston Scientific as not all provision of the legislation are effective. However, the products that Boston Scientific produces are subject to a 2.3% excise tax as part of the HealthCare Reform Act. In 2013, Boston Scientific recorded $73 million to their selling, general, and administrative expenses due to this excise tax. As reimbursement programs from Medicare and Medicaid change, this may have a negative impact on Boston Scientific as hospital may have to choose cheaper products from other companies (Boston Scientific 2013 10-K).

There are currently over 24,000 lawsuits over vaginal mesh products by women (Dye), this may negatively impact Boston Scientific’s performance as they may lose credibility within their Woman’s Health portfolio of products and suffer large settlement fees. Litigation over patent infringement is also a constant influence on performance, a negative outcome in any of these lawsuits may have a negative impact on Boston Scientific’s performance as they may not be able to continue with the sale of a product or may suffer large settlement fees (Boston Scientific 2013 10-K).

Problem Analysis & Description

Problems

There are six problems that Boston Scientific is facing or contributing to its financial problems, decline in market share, or endangering their future. One of the problems has been selected as a problem statement that will be discussed more in depth in the next section.

Litigation with Johnson & Johnson

Boston Scientific acquired Guidant in 2006 for approximately $27 billion (Guidant Press Release). Before this purchase was made Guidant had a deal in place with Johnson and Johnson for $21.5 billion. In November 2014, a trial is set to begin in which Johnson & Johnson seeks $7.2 billion in damages and interest, for breach of contract by Guidant (Ax). This problem is seen as both mission critical and urgent, as it may affect the way Boston Scientific operates in the future, products available for sale, and may affect the future funds available for acquisitions and research and development. However, this problem seems out of the realm for what can be under taken in this paper.

Vaginal Mesh Lawsuits

Boston Scientific currently faces over 24,000 lawsuits over its discontinued vaginal mesh implants. Defendants are claiming that Boston Scientific is guilty of gross negligence with these devices as they rushed the product to market without proper clinical trials, they had defective design, and Boston Scientific failed to warn doctors and patients of the potential risk with using their vaginal mesh devices (Dye).

These lawsuits are just beginning to go to trial. So far, there have been five trials with Boston Scientific winning the first two cases, and losing the last three. In September 2014, Boston Scientific lost its first lawsuit in Texas and was ordered to pay the plaintiff $73 million. This verdict has since been reduced to $11 million (Feeley). During the month of November, Boston Scientific has had two verdicts go against them, one in Miami for $26.7 million, and one in West Virginia for $18.5 million (Dye). This problem is seen as urgent and mission critical as Boston Scientific has only $945 million in reserves for litigation settlements and lawyers’ fees (Boston Scientific 2013 10-K). A negative outcome in any of these lawsuits will reduce future funds available for acquisitions and research and development.

Increase in Accounts Receivable Days Outstanding

Sales to government-owned or supported customers in Southern Europe, most notably Greece, Spain, Italy, and Portugal have increased accounts receivable days outstanding to historic levels. These countries historically accumulate large receivable balances and then subsequently pay large lump payments on a settled amount. As of December 31, 2013 $95 million in receivables were more than 180 days past due, with $50 million of it being more than 360 days past due. If government funding becomes unavailable, Boston Scientific may not be able to collect on these receivables (Boston Scientific 2013 10-K). This problem is seen as not urgent or mission critical. If any of these governments decide not pay, revenues will be decreased and bad debt expense will be increased.

Foreign Currency Fluctuations

In 2013, Boston Scientific was negatively impacted $156 million by fluctuations in foreign currency (Boston Scientific 2013 10-K). This problem varies depending on foreign currencies in relationship with the US Dollar. In some years, this can be a positive number. However it had a negative impact on operating income in 2013. Since this problem fluctuations and at times may have a positive impact it is not seen as mission critical or urgent.

Product Recalls

Product recalls affect a firm’s profitability in three key ways. The first way is by increasing the costs to the firm. These costs can be from multiple sources which include correcting/replacing costs, the transaction costs of the recall process and costs of unsold inventory. Second, a firm’s revenues are reduced by product recalls, as a result of lost sales. This can happen in a few ways, such as loss of sale from product recall, reduction in sales of related items, and loss of sales due to loss of market share. Third, consumer confidence is impacted when a company issues a recall of their products, which can affect the firm’s ability to sustain its market presence (Sriram).

Between September 2013 and April 2014, Boston Scientific issued 7 product recalls, accounting for 48,000 previously sold devices (GlobalData Boston Scientific). This problem is seen as Mission Critical but not urgent. All of Boston Scientifics’ competitors are facing similar recall problems, according to their SWOT Analyses by GlobalData. Boston Scientific needs to address these recalls and identify why they are happening, this should be done in a timely manner and before their competitors address theirs to insure that they do not lose market share.

Declining Sales in Coronary Stent Systems and Cardiac Rhythm Management

Net sales of CS systems and CRM devices have accounted for roughly 43% to 54% of revenue between 2009 and 2013. Revenues of CS systems have decreased from $1.879 billion in 2009 to $1.177 billion in 2013, an average annual decrease of 11% while CRM devices have decreased from $2.562 billion in 2009 to $1.886 billion in 2013, an average annual decrease of 7.4%.

Overdependence of these declining product lines have directly contributed to decreased annual revenues of $1.045 billion between 2009 and 2013, or by approximately 3.4% per year (Table 2. below).

Table 2. Five year revenue report of Coronary Stent Systems and Cardiac Rhythm Management devices. (Taken from annual 10-K’s).

Problem Statement

43% of Boston Scientific’s current revenue comes from CS systems and CRM devices. CS systems revenue has declined 11% annually, while CRM revenue has declined 7.4% annually over the last five years. Declining revenues of these business segments, have directly contributed to a $1.045 billion decline in revenues over the last five years.

Assessing the Root Causes of the Problem

A fishbone diagram (Appendix C) was used to find the causes of why Boston Scientific has experienced a decrease in operating income from 2009-2013. All of these causes will need to be addressed at some point, in this paper we will address why CS systems and CRM devices are experiencing a decrease in revenues.

Declining Market Share in Coronary Stent Systems

Boston Scientific’s CS systems have had increased competition as new competitors continually enter the market (Stent Manufacturing). This increased competition has put additional pricing pressures on Boston Scientific reducing Boston Scientifics’ market share (Boston Scientific 2013 10-K).

One of the biggest reason for market share loss has been the 2012 launch of Medtronic’s (Medtronic 2014 10-K) and Abbott Laboratories’ next generation CS systems that are bioabsorbable (Abbott 2013 10-K). Boston Scientific has been late to market with the launch of their own next generation bioabsorbable CS system and had a limited release in Europe at the end of 2013 (Boston Scientific 2013 10-K). Boston Scientific was expected to present their 12 month clinical study findings at the American Heart Association Conference on November 19, 2014 (Synergy).

Another reason for declining market share of CS system has been the reduction in overall market size of this industry (Boston Scientific 2013 10-K). A major reason for the reduction in market size was the publication of data from the Clinical Outcomes Utilizing Revascularization and Aggressive Drug Evaluation (COURAGE) trail, which demonstrated that coronary revascularization does not reduce the risk of major cardiovascular events over and above optimal medical therapy in patients. This has had a negative influenced on the rate at which doctors use percutaneous coronary intervention procedures (Riley).

Decline in Cardiac Rhythm Management Devices Average Selling Price

Hospitals have recently come under pressure to reduce costs. As a result many have sought to negotiate better prices for medical supplies, often targeting expensive medical devices such as pacemakers (Lee). This coupled with governmental pricing pressures by reducing reimbursement by Medicare under the Health Care Reform Act have driven the average selling prices down (Boston Scientific 2013 10-K).

Supply Constrained

In March, 2013 Boston Scientific became supply constrained and were only able to provide a very limited amount of their subcutaneous implantable cadioverter defibrillator (S-ICD), the only one of its kind, during the second and third quarters of 2013 (Boston Scientific 2013 10-K). Boston Scientific believes that many of the components used in the manufacturing of their products are available from multiple sources, and that redundant capacity exists among their suppliers. In the event that redundancy does not exist they feel that alternatives can be developed within a reasonable time frame (Boston Scientific 2013 10-K). The S-ICD is the only product of its kind on the market. Not having a strong relationship with any one supplier effected the supply of the parts used to manufacture this device.

Over Dependence of CRM and Coronary Stent Sales

Boston Scientific is greatly dependent on the sale of its CRM products and CS systems (see Table 2. on page 14). Sales of these products accounted for 43% of Boston Scientific’s revenue in 2013, and accounted for 54% in 2009. The declining revenues of these products are directly responsible for the decline in Boston Scientifics revenues since 2009.

Boston Scientific is over dependent on these products, as a result of focusing their acquisitions on products of this nature. In the first half of 2012, Boston Scientific acquired Cameron Health, Inc., giving them the only S-ICD product on the market (Boston Scientific 2013 10-K). In October 2012, Boston Scientific acquired BridgePoint Medical, Inc., to expand their core coronary technology.

Competitors Get New Product to Market First

In 2012, Medtronic got their bioabsorbable coronary stents to market (Medtronic 2014 10-K), while Boston Scientific has yet to launch their version in the United States. Medtronic currently has 37 manufacturing facilities around the globe, all of which have Research and Development facilities on site. Medtronic maintains strong relationships with their suppliers, working closely with them in design and specification of product parts. Medtronic believes that manufacturing all of their own devices, has not only helped increase gross profit margin, but in combination with its relationships with suppliers has enabled them to constantly be first to market with new technologies (Medtronic 2014 10-K). This has enabled Medtronic to gain their 25.9% market share of Medical Device Manufacturing in the US.

In comparison Boston Scientific operates 12 manufacturing facilities around the globe, all of which have research facilities on site. Boston Scientific currently uses outsourcing to manufacture some of their products (Boston Scientific 2013 10-K) and does not have strong relationships with its suppliers. This leaves Boston Scientific vulnerable to supply chain constraints, and reliant on third party vendors to get their product to market. Failure to get product to market as quickly as their competitors has resulted in market share declines.

Solutions

Solution Analysis

Three solutions have been developed to address the problem of being over dependent on CRM products and CS systems. These solutions are meant to give Boston Scientific more diversity within their product portfolio, and to reduce the impact of declining revenues in CRM products and CS systems.

Focus Acquisitions on Other Core Businesses

Boston Scientific has a history of using acquisitions to grow their core business. This has been identified as one of their strengths in SWOT Analyses by both GlobalData and MarketLine (see Appendix B). However two of the last three acquisitions have been to further their market share in CRM devices and CS systems. Boston Scientific has been experiencing increased revenues in their other core businesses (Boston Scientific 2013 10-K). To further expand these divisions and continue their increased market share Boston Scientific should focus their future acquisitions solely on their other core businesses. This would be a viable option as it would increase their market presence in these other core businesses segments, however it would come at an expense to already suffering revenue streams of CS systems and CRM devices. This decreased focus in these categories would greatly affect the employees that work in these division, and no longer emphasizing the importance of these divisions’ may cause employees to seek employment with Boston Scientific’s competitors.

Increase Funding for R&D in Neuromodulation

As we saw in Chart 2. (See page 9) the Neuromodulation segment of Medical Device Manufacturing in the US accounted for an estimated 7% of the industries $37.6 billion in revenues in 2014, or approximately $2.632 billion. A report published by Market Watch on August 5, 2014 estimates that this industry will experience a 10% compound annual growth rate between 2013 and 2020, growing to an estimated $4.663 billion and is the fastest growing segment within the US Neurological device market. In 2011 Transparency Market Research estimated that the global market for Neuromodulation was worth $2.76 billion and was expected to grow to $7.07 billion in 2018, a compound annual growth rate of 14.4% (Parmar).

Boston Scientific’s Neuromodulation products experienced the greatest increase in revenues during 2013, growing approximately 23% to $453 million compared $367 million in 2012. Boston Scientific currently offers only Spinal Cord Stimulator Systems (SCS Systems) in this business segment. Boston Scientific should increase the research funds available for this division to $200 million per year. This would allow Boston Scientific to develop other products such as Deep Brain Stimulation (DBS) Systems to treat underserved markets such as obesity, epilepsy, Alzheimer’s, and depression (Medical Device).

In 2013, Boston Scientific spent $861 million in Research and Development, approximately 12% of net sales. Assuming that Boston Scientific spreads its funding evening across its 7 core businesses, each business received approximately $123 million in 2013. Increasing the funding for research in Neuromodulation to $200 million has the potential to unlock some technologies that can take advantage of underserved markets. However, increasing the funds for research in Neuromodulation will decrease the research funds available to other divisions to approximately $110 million, perhaps reducing the potential in those segments.

Enter Diabetes Device Market

As we saw in Chart 2. (See page 9), Diabetes devices account for 5% of the revenues for Medical Device Manufacturing in the US market, and the sector is expected to grow to $16 billion in 2017 (US Diabetes). Boston Scientific currently does not compete in this sector of medical devices. Boston Scientific’s two biggest competitors Abbott Laboratories and Medtronic are currently doing operations in Diabetes devices. Looking at Appendix D, we can see that in their last fiscal year Abbott Laboratories generated $1.31 billion in revenue, while Medtronic generated $1.657 billion in revenue in this industry segment.

There are three major divisions of diabetes devices in which to compete; insulin pumps, continuous glucose monitoring (CGM), and blood glucose monitoring devices (Neil). Market Entities are playing a major role in demonstrating the value of CGM devices through independent studies and testing by various clinicians, which is moving the devices forward. This has had an effect on the demand for insulin pumps (Medical Device). However when CGM devices are combined with insulin pumps, the basis for the long-sought-after artificial pancreas is created (Neil). Boston Scientific should start developing both insulin pumps and CGM devices to take advantage of this growing market segment. This would allow them to tap into a whole new revenue source. However, this would greatly impact the research and development of their other products, or come at a cost to their debt levels if they were to acquire a company currently competing in this business segment.

Weighted Decision Matrix

A weighted Decision Matrix was used to decide which solution Boston Scientific should implement. The following paragraphs will describe the six criteria used along with the weight they were given and why. The solution with the highest score was the one to be implemented. (See Appendix E for the matrix and a discussion of the rankings the solution received.)

Long Term Financial Impact

Boston Scientific has been suffering decreased revenues for the last five fiscal years, which have contributed to Net Losses in four of those years. Boston Scientific also faces a large amount of potential litigation related charges. It is very important that the solution implemented will have a positive impact on future financial performance and help offset the declining revenues of CS systems and CRM devices. For this reason Long-Term Financial Impact was given a weight of .30.

Short Term Costs

Boston Scientific had $4.237 billion in long term debt, and only $217 million in Cash and Cash Equivalents at the end of their 2013 fiscal year. Boston Scientific is paying down their long term debt (see Appendix A) in order to maintain investment grade credit ratings (Boston Scientific 2013 10-K). It is important that the solution implemented does not increase debt levels or over spend Cash on hand. For this reason Short Term Costs was given a weight of .25.

Potential Risk

Potential Risks include future litigation claims from class action lawsuits or patent infringement. They also include the possibility of the solution not having the results that were expected, and negatively impacting future financial progress. It is important the solution implemented takes these potential risks into consideration, for that reason potential risk was given a weight of .15.

Effect on Stakeholders

Any solution that is implemented should take into account Boston Scientific’s stakeholders (see pages 5-6) and the affect that solution will have on them. For this reason effect on stakeholders was given a weight of .15.

Business Strategy

The Business Strategy of Boston Scientific has five imperatives: Strength Execution to Grow Share, Expand into High Growth Adjacencies, Drive Global Expansion, Fund the Journey to Fuel Growth, and Develop Key Capabilities (Boston Scientific 2013 10-K). It is important that the solution adheres to the Mission, Brand Declaration, and Values of Boston Scientific. For this reason Business Strategy was given a weight of .10.

Time to Implement

The amount of time it is going to take to implement the solution is important, but is the least important of all the criteria. For this reason it was given a weight of .05.

Recommendation

The Solution with the highest score in the decision matrix was to increase the amount of funding for research and development of Neuromodulation devices.

Ethical Screen

The Solution calls for Boston Scientific to increase the funding for Neuromodulation research and Development from $123 million to $200 million. This will allow Boston Scientific to develop DBS systems allowing them to take advantage of their fastest growing core business while developing devices for markets that are currently underserved (Medical Device).

Implanting DBS systems requires surgical implantation of a lead of electrodes into a nucleus or fiber tract within the brain. An implantable pulse generator (IPG), containing battery and stimulation hardware, is implanted subcutaneously in the chest of the patient, and an extension cable is tunneled under the skin to connect the IPG to the DBS lead. Once implanted the DBS system applies electric current to targeted areas of the brain that treat the patients’ symptoms (Johnson).

The process in which DBS systems are implanted or work may seem unethical. But when looking at possible medical problems that DBS can treat such as obesity, epilepsy, Alzheimer’s, depression, Parkinson’s, obsessive-compulsive disorder, and tics associated with Tourette syndrome (Johnson) to name a few, the greater good outweighs the unethicalness of implantation.

Cost Benefit Analysis

There is a 4 year time frame for the following cost benefit analysis, allowing for development time, clinical trials, FDA approval, marketing, selling, and revenue analysis.

4 Year Cost Benefit Analysis

Tangible Benefits

Tangible Costs

· Larger Product line of Neuromodulation devices

· $200 million per year of research budget devoted to Neuromodulation.

· Increased revenues in Neuromodulation business

· $13 million per year decrease in research budget for other core businesses

Intangible Benefits

Intangible Costs

· Increased innovation in Neuromodulation devices

· Decreased funding for research on other core businesses

· Exploits fastest growing core business segment

· May miss out on potential advancements in other core businesses

· Potential to decrease the dependency on CRM device and CS system sales.

· Potential market share loss in other core businesses from lack of innovation

· Further expand market share in the Neuromodulation industry.

· Key employees in other core businesses may deflect

It is difficult to estimate the revenues that will be generated by expanding the Neuromodulation product line, but a market report by Fierce Medical Devices suggests that the benefits can be major. Currently, Boston Scientific is number 2 in market share behind Medtronic in Neuromodulation sales, and is one of 4 major competitors in this industry (Working Hard). Boston Scientific’s SCS device has gained a significant gain in market share as physicians gravitate towards it, as it offers twice as many electrode leads as the competitor’s (U.S Neuromodulation). This puts Boston Scientific in position to capitalize on DBS devices, as physicians are becoming more familiar with their Neuromodulation devices.

Increasing the funding for research in this field, would come at a cost to its other divisions. This could be seen by Boston Scientific’s employees as a lack of commitment to their other core divisions and cause these employees to deflect. Reduced funding in these other core businesses may also cause Boston Scientific to miss potential innovation opportunities in their other core businesses. However, the potential that Boston Scientific has in the Neuromodulation device industry out ways these potential losses.

Feasibility

This Solution is easily feasible, as Boston Scientific already operators in the Neuromodulation industry. This plan would take some time to implement as Boston Scientific would not want to cut the funding of works in progress, in other core businesses. Boston Scientific would simply have to start allocating more funding to this division as it becomes available, and decrease the funding of other divisions as current projects finish.

Implementation Plan

Implementation will not be difficult, but it will take 23 months to get DBS systems to market and start earning a market share. No initial announcement should be made, as Boston Scientific will have to wait for current projects in other divisions to wrap up to have additional funds available. In the meantime, Boston Scientific should use the existing funds available to the Neuromodulation division and start research immediately of DBS Systems. As the additional funds become available Boston Scientific should apply them to the research of DBS systems. Gantt Project was used to evaluate the time frame of getting DMS systems to market (see Appendix F). If there are no setbacks in the FDA approval process Boston Scientific can expect to start shipping DBS systems in February of 2017.

Once the first generation DBS system is developed and begins to sale, Boston Scientific should use the additional research funds, along with market data gathered to begin developing its second generation model, making improvements or targeting different aliments that the doctors who use them suggest. This will strengthen the market position Boston Scientific has in the Neuromodulation segment.

Success Metrics

Evaluation

To ensure that this project is successful, different processes will have to take place along the way. The first step was the development of a Gantt Project Chart (see Appendix F), which outlines the time frame of getting DBS systems to market. Using this chart Boston Scientific will be able to evaluate their progress of each step in the development, marketing, and manufacturing of these devices. Success of getting the product to market will be measured on whether or not Boston Scientific can get the product to market in the time frame suggested.

Once devices have been developed, marketed, manufactured, and begin to sell Boston Scientific will be able to evaluate the success of the project through tracking of quarterly sales. This should be done on a quarterly basis for the remaining 3 quarters of 2017 and the four quarters of 2018. As data is gathered, Boston Scientific will be able to develop other marketing efforts to improve sales. The successes of this solution will be measured by the revenues that DBS systems generate, and the overall market share Boston Scientific gains in the Neuromodulation segment.

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Appendices

Appendix A

Boston Scientific Balance Sheet. Taken from Morningstar.

Appendix B

MarketLine SWOT Analysis of Boston Scientific August 27, 2014

GlobalData SWOT Analysis of Boston Scientific July 23, 2014

Appendix C

Appendix D

A look at Abbott Labs Medical Device Revenues by segment for

Fiscal Year

ended Dec. 31 2013 (taken from Abbott Laboratories 2013 Annual Report).

A look at Medtronic Medical Device Revenues by segment for fiscal year ended April 25, 2014 (taken from Medtronic’s 2014 Annual Report).

Appendix E

Weighted Decision Matrix

Neuromodulation received the highest score when looking at L.T Financial Impact, followed by Diabetes, and Acquisitions. Both Neuromodulation and Diabetes present the best chance at long term financial gains, with Neuromodulation getting a slightly better score as Boston Scientific already operates in this sector. Neuromodulation received the highest score when looking at S.T costs. This is because Boston Scientific would simply allocate more funding for Neuromodulation while decreasing funding for its other businesses. Both Diabetes and Acquisitions would cost money up front, and Boston Scientific is unwilling to increase its debt levels. Neuromodulation received the highest score for potential risk, as it is the least risky of the three solutions, both Acquisitions and Diabetes are extremely risky as it is unclear if Boston Scientific could penetrate the diabetes market or whether or not the acquisitions would be successful. Neuromodulation received the highest score for effect on stakeholders as it is carrying on business as normal, just reallocating research funding. It was unknown what impact the other solutions would have on stakeholders. Diabetes got the highest score followed by Acquisitions and Neuromodulation for business strategy as entering new markets is part of their strategy, along with strategic acquisitions. Neuromodulation received the highest score for implementation as can be easily done, Diabetes, and Acquisitions would take much longer to implement.

Appendix F

Gantt Project Diagram of process to get DBS systems to market

Comparison of Revenues

Boston Scientific (BSX)

2009 2010 2011 2012 2013 8.1880000000000006 7.806 7.6219999999999999 7.2489999999999997 7.1429999999999998 Abbott Laboratories (ABT)

2009 2010 2011 2012 2013 30.765000000000001 35.167000000000002 38.850999999999999 39.874000000000002 21.847999999999999 Medtronic (MDT)

2009 2010 2011 2012 2013 14.599 15.817 15.933 16.184000000000001 16.59 St. Jude Medical (STJ)

2009 2010 2011 2012 2013 4.681 5.165 5.6120000000000001 5.5030000000000001 5.5010000000000003

Fiscal Year

Revenues in Billions

Percent of Industry Revenues 2014

Products and services segmentation Percent of Ind ustry Revenues 2014

Cardiovascular Devices Diabetes Devices Spinal Devices Irradiation Devices Anesthesia and Respiratory Devices Neuromodulation Devices Other Devices 0.15 0.05 0.18 0.22 0.22 7.0000000000000007E-2 0.11

Coronary Stent

System Revenue

(in billions)

Coronary Stent

% of Total

Revenue

CRM Revenue

(in billions)

CRM % of Total

Revenue

Combined

Revenues
(in billions)

Combined % of

Total Revenue

Total Revenue

(in billions)

20091.87923%2.56231%4.44154%8.188

20101.67021%2.18028%3.85049%7.806

20111.62021%2.08727%3.70748%7.622

20121.36319%1.90826%3.27145%7.249

20131.17716%1.88627%3.06343%7.143

Annual
Growth

Rate-11.0%-7.4%-8.9%-3.4%

Fiscal year ends in December. USD in
Billions except per share data.

2009-122010-122011-122012-122013-12

Assets

Current assets

Cash and cash equivalents0.8640.2130.2670.2070.217

Receivables1.3751.321.2461.2171.307

Inventories0.920.8940.9310.8840.897

Deferred income taxes0.5720.4290.4580.4330.288

Prepaid expenses0.330.1830.2030.2810.302

Other current assets0.576

Total current assets4.0613.6153.1053.0223.011

Non-current assets

Property, plant and equipment

Gross property, plant and equipment3.2663.1683.1833.523.67

Accumulated Depreciation-1.538-1.471-1.513-1.956-2.124

Net property, plant and equipment1.7281.6971.671.5641.546

Goodwill12.40410.1869.7615.9735.693

Intangible assets6.7316.3436.4736.2895.95

Other long-term assets0.2530.2870.2810.3060.371

Total non-current assets21.11618.51318.18514.13213.56

Total assets25.17722.12821.2917.15416.571

Liabilities

and stockholders’ equity

Liabilities

Current liabilities

Short-term debt0.0030.5040.0040.0040.003

Accounts payable0.2120.1840.2030.2320.246

Accrued liabilities2.6091.6261.3271.2841.348

Other current liabilities0.1980.2950.2730.2520.227

Total current liabilities3.0222.6091.8071.7721.824

Non-current liabilities

Long-term debt5.9154.9344.2574.2524.237

Deferred taxes liabilities1.8751.6441.8651.7131.402

Other long-term liabilities2.0641.6452.0082.5472.569

Total non-current liabilities9.8548.2238.138.5128.208

Total liabilities12.87610.8329.93710.28410.032

Stockholders’ equity

Common stock0.0150.0150.0150.0150.016

Additional paid-in capital16.08616.23216.34916.42916.579

Retained earnings-3.757-4.822-4.381-8.449-8.57

Treasury stock-0.492-1.092-1.592

Accumulated other comprehensive income-0.043-0.129-0.138-0.0330.106

Total stockholders’ equity12.30111.29611.3536.876.539

Total liabilities and stockholders’ equity25.17722.12821.2917.15416.571

CriteriaWeightRawWeightedRaw Weighted Raw Weighted

Long Term Financial Impact0.351.582.472.1

Short Term Costs0.2530.7571.7510.25

Potential Risk0.1540.671.0510.15

Effect on Stakeholders0.1550.7571.0550.75

Business Strategy0.160.630.390.9

Time to Implement0.0570.3590.4510.05

Total14.5574.2

Focus Acquisitions on

other core Businesses

Increased R&D in

Neuromodulation
Enter Diabetes Device
Market

WHAT NEEDS TO BE DONE

(I) Problem Identification

a. This section should include brief discussions (ie. a paragraph for each) of all significant challenges, weaknesses, problems, or the company’s inability to take advantage of business opportunities you have found. For each, describe the issue and how it impacts the company and, if possible, give a brief description of key causes.

b. For the “main” problem you have identified, provide an extended discussion of the issue:

i. Nature of the issue

ii. How it impacts the company and what’s likely to happen if it isn’t resolved

iii. Whether or not it’s mission critical and why, urgent and why

iv. Formal Problem Statement

v. Thorough Root Cause Analysis

(II) Identification of Alternative Solutions

a. This section should include a brief (1-2 paragraphs) discussion of the alternative solutions you have identified including a discussion of the solution itself, how it could help solve the problem, and brief discussion of Pros and Cons for the alternative.

(III) Evaluation of Alternative Solutions

a. Discussion of objective criteria for evaluation of alternatives

b. Comparison of how 3 – 5 alternative solutions meet these criteria

(IV) Discussion of Recommended Solution

a. Clear statement of the recommended solution

b. Cost – Benefit Analysis with discussion of key factors

c. Feasibility Analysis

d. Ethical Screen

i. Alignment of the proposed solution with company values

ii. Discussion of legal or ethical issues related to the proposed solution

iii. Discussion of key stakeholders and how they would be impacted by the proposed solution

(V) Solution Implementation & Success Measurement

a. Implementation

i. Key steps involved in implementing the required solution

ii. Significant resources required

iii. Timeline

b. Monitoring and Measurement

i. Discussion of key criteria to be used to evaluate the success of the proposed solution

ii. Plan for monitoring improvements following start of implementation

1. Frequency

2. Milestones

3. Expectations

PROBLEMS IDENTIFIED

Problem Identification

Some of the risk or potential problems factors Under Armour lists on its most recent From 10-K Annual Report, seem to have been realized in recent time. From issues to do with the company having the ability to develop and launch new, innovative and updated products, and their ability to accurately forecast customer demand for their products and to manage inventory in response to changing demands, as well as a loss of a key customer which could lead to material loss of net revenue and growth retardation the increasing competition that has forced them to reduce the prices of their offerings and legal issues with competitors and shareholders. All of these are potential risks that have turned into actual issues of concern for the sporting goods company and which could and have already had a negative effect on the company’s results of operations ( 10-k 9).

Failure to anticipate consumer preferences during the At leisure fashion trend period

Under Armour’ stock price is said to have fallen by 30% in the first quarter of 2017. This according to analysts was as a result of the company not keeping up or being quick enough to react to the shift of athletic apparel to more fashionable clothing like its competitors had. Analyst Christopher Svezia said that because of this lapse in innovation the company’s “ability to return to its former glory is unknown”. Svezia says that presently apparel and footwear which are anchor segments for the company only make up less than 5% of its total sales, none the less the company is busy trying to play catch up with the athleisure trend, but is a bit late to the train. Under Armour has admitted to their lack of foresight when it came to the athleisure craze and none other than the CEO and founder Kevin Plank on a phone call with analyst after the earnings report came out said ” the consumer wants it all. They want product that looks great that wears great, that you can wear at night with a pair of jeans, but that also does perform for them. We need to be more fashion” (Green). Athleisure is key trend for North America and so it is paramount for Under Armour to get in on the action and with 80% of UA’s online sales pegged on this line of clothing now it is paramount that they gain traction because many industry experts predict this trend will be around for a while longer(Green).

Over reliance retail for revenue and growth

Yet another problem that Under Armour seems to be going through as predicted in its risk assessment is the over reliance on retailers for its revenue and growth. This has been shown by the failure of one of its biggest customers Sports authority and deals that have gone sour with the likes of Dick’s Sporting Goods and Kohl’s. In the case of Sports Authority once the company announced that it was going bankrupt, it disrupted the retail environment in North America which is still the biggest market for Under Armour. The effects on th financial of Under Armour were evident since it has continuously missed its earnings projection since then. The company cut its sle outlook in 2016 following the declaration of bankruptcy by Sports authority. the company said with the bankruptcy announcement under Armour would only be able to realize only about a quarter of the revenue it had initially planned to get from Sports authority Again, it said that it would take a $23 million impairment charge on its present quarter. This would result in the company posting $4..93 billion in sales that year which is a drop from the $ 5 billion projected in April and less than the $5.03 billion analysts had predicted(Lisa). In early 2017 UA missed its earnings and sales projections for the fourth quarter and dropped to 20% at about $18.90. As at 9th march 2018 the stock was selling at 17.16 and had dropped 1.27%. Even though the company has continued to deliver on revenue, it has failed to leave up to analyst expectations for close to a decade. In yet another show of the companies over reliance on retail at present is a recent deal with Midtier department store Kohls. In an attempt to rev up growth, the company in July of 2016 announced that it would sell a new line of its gear at Kohl’s, this was a 360 turn away from traditional sporting goods stores such as Dick’s who have been known to be averse to giving discounts as much as Kohl’s do. Under Armour in pursuing this strategy wanted to try and plug the hole left by the departure of Sports Authority. So they planned to sell sporting goods at Kohl’s that would not eat into the company’s sporting goods sales. However, this strategy seems to have worked against Under Armour since it upset one of its biggest customers Dick’s since it has had to lower its own growth expectation with Under Armour itself announcing a restructuring plan on first Aug of 2016. Dicks complained during one of its earning calls that it was forced to bring down its own prices because of the aggressive discounting by its rivals. Dicks in recent time has introduced its own private-label line of athletic wear, what this means is that there is little space for Under Armour in the stores. This stretched relationship of Under Armour and its retail partners is a reason for worry for the company and it needs to come up with measures that will reduce this over reliance (Gottfried).

Legal issues

Under Armour has also had its own share of legal issues, ranging from litigation by rivals Adidas over patents to recently being sued by its own shareholders over a drop in earnings. As regards the suit filed by Adidas, Under Armour was accused of infringing on 10 of Adidas patents that were used in the German company’s fitness tracking system which was known as MiCoach. Even though the two companies core business is shoe and apparel making, the entry into the accessories market and more so the technology powered market is revealed by investments into gadgetry. Under Armour in 2013 paid $150 million for a company known as MapMyFitness, which at present has over 20 million people registered on it to use its website as well as mobile application so as to track, record, map and share their work outs. According to Addidas the MapMyFitness product and others by Under Armour are similar to those of Adida’s. Adidas said that Under Armour willfully infringed on its patent and for this it sought a jury trial even though .Ultimately the two settled matters out of court when

Under Armour agreed to pay Adidas AG licensing fee of undisclosed amount for some of its patents (Germano). In a more recent suit Under Armour was sued by its shareholders Gin a federal class-action lawsuit in which the CEO Kevin Plank and his company are accused of knowingly misleading shareholders regarding Under Armour financial health. According to the suit even though the company had shown enthusiasm externally to the plaintiff and the shareholders, the company and its CEO especially were well aware of the decreasing growth margins and of the over surplus of unsold inventory. However, the company in a statement to the Baltimore Sun said the claims were without ground and said that “Under Armour will vigorously defend the case”. The principle plaintiff known as Brian Brecee filled the suit on behalf of everyone who bought the Under Armour Class A and Class C common shares in between April 21, 2016 and Jan. 30 2017. In the suit he says that Plank had seen the writing on the wall regarding the financial situation of the company and he had set off selling his own Under Armour shares beginning in April 2016 so as to avoid any individual loss but only enough to maintain control over Under Armour, by while at the same time praising the financial health of the company. These legal problems could adversely affect the revenue of the company and projected future growth prospects and therefore need to be dealt with accordingly (Bonesteel).

Problem statement

The main problem from the ones listed above has to do be the issue of earnings. It is clear from the different problems the company is going through, from issues with not being upto date with trends, declining retail space and litigation over projected earnings that the company needs to find a solution to its earning problem quickly so as to avoid going under.