Globus Medical: Little Fish in a Big Pond? A Competitive Analysis
In response to UVA Darden's Foundations of Business Strategy - December 2020
Orthopedics is the field of medicine that focuses on the musculoskeletal system of the human body. This system includes the skeletal bone structure, as well as the muscles, ligaments, and tendons that actuate the body into motion. Unhealthy bone tissue or lack of spinal motion are common ailments that require the assistance of medical devices to be fixed or implanted to remedy. The industry of orthopedic medical devices is one that is constantly growing and adapting based on access to more patients and new medical techniques. It is controlled by larger firms with established histories and regulated heavily by government bodies like the Food and Drug Administration (FDA).
Globus Medical was founded in 2003 by David C. Paul and is currently being run by CEO David M. Demski.1 While Globus Medical is a smaller company compared to the other firms, it is an active player in the highly competitive orthopedic medical device industry.
Globus Medical holds a philosophy that drives the company’s three fundamental pillars: Providing Exceptional Response, Delivering Innovation, and Advancing Patient Care.2 All three pillars push Globus Medical to be more competitive in the already highly competitive market. According to Globus Medical, other competitive firms in the orthopedic medical device industry have “greater financial, technical, and marketing resources.” They acknowledge that the larger firms are more incorporated in the industry, thus have a longer operating history and are more reputable.3 The firm successfully competes in the industry by sticking to the three principles that they hold. They know how to be successful by staying agile and delivering products to surgeons before their competition (Providing Exceptional Response) as well as providing proprietary solutions in an ever-changing industry (Delivering Innovation).
Delivering innovative products in a timely manner is nothing new to competitive firms in the industry (DePuy Synthes of Johnson & Johnson, Medtronic, Stryker, Zimmer Biomet, etc.). All companies want to deliver new products as quickly as possible to keep up with the ever-shifting industry. What is Globus Medical doing to stand out against the medical device giants with greater “financial, technical, and marketing resources”?
Globus Medical’s third pillar, Advancing Patient Care, is all about medical education. While other firms in the industry provide education for surgeons and physicians, Globus Medical is unique in that it provides education for the patients as well. They walkthrough likely symptoms and related procedures to their products, all for the comfort of the patient.4 Their website even includes a “Doctor Discussion Guide” for the patient to bring to their orthopedic surgeon to better understand upcoming procedures.5 At the Musculoskeletal Education and Research Center (MERC), Globus Medical furthers that education for healthcare professionals through virtual educational courses, one-on-one cadaveric training, and research collaboration. The MERC facility houses state of the art equipment to teach surgeons how to use the newest devices created by Globus Medical.6
To better understand the industry and the profit potentiality of each firm in it, I conducted a Porter’s Five Forces Analysis surrounding orthopedic medical devices. The Five Forces are as follows: threat of entry, intensity of rival, threat of substitutes, bargaining power of suppliers, & bargaining power of buyers. I will also investigate Globus Medical’s role in the industry and how its business strategy promotes itself over other competitive firms.
Threat of Entry (Low)
While there is nothing stopping anyone from designing and building a product, the FDA restricts which products are eligible for sale in the U.S. healthcare industry. Restrictions are increasingly imposed on the production of orthopedic medical devices depending on the product’s risk to the patient. The regulations create a steep learning curve as a barrier to entry for new firms. Medical device companies employ quality and regulatory personnel to understand and execute the specific regulations related to patient safety. With every classification, from “Class I” to “Class III”, stricter regulations and design control impede time to market. While waiting for market release, customers are not buying the product, costing the firm research and development resources. The threat of entry from competing firms is low due to device regulations and costs required for research and development.
Intensity of Rival (Low)
As discussed previously, the FDA’s strict regulations on medical devices is enough to deter even the most determined product manufacturer from entering the orthopedic medical device industry. Because of this barrier to entry, there is a low number of orthopedic device manufacturers in the world. The industry is rapidly changing and frequently opens new opportunities for medical device suppliers to reach a new pool of customers. According to Globus Medical, the orthopedic medical device industry will continue to grow due to growth of musculoskeletal procedures worldwide, demand for minimally invasive surgeries, and further use of robotics in orthopedic surgeries. Globus Medical can capitalize on opportunities to differentiate its medical devices as every surgeon is unique in their techniques for treatment and every patient is unique in anatomy or medical condition. Each of the factors laid before indicate an industry with a low intensity of rivals because of the substantial market that each firm can explore to maximize profitability. Globus Medical has capitalized on the high volume of unique products in the industry and even entered adjacent spaces such as Trauma and Robotics for minimally invasive procedures as ways to diversify their orthopedic medical products offered. 7
Threat of Substitutes (Low)
The FDA regulates medical devices with one concern in mind; the patient’s safety. Depending on the patient’s condition and medical procedure, a medical device’s classification is identified to ensure proper precautions are taken to reduce patient risk. These precautions include proper design control procedures, product risk analysis, verification and validation processes, and in some cases, post market surveillance and premarket approval. Since the patient’s safety is threatened when the regulations are not followed, it is illegal to sell medical devices for clinical use that have not been approved by the FDA. Physicians and surgeons must be wary of substituting medical devices not cleared for clinical use, especially if the device is Class II or Class III.
Device specialization and innovation in the industry leads to a reduction in the risk of substitution from other competitors. Firms can minimize their risk of substitution to essentially zero by having a product that cannot be replicated. Globus Medical achieves just that with their product ExcelsiusGPS®, one of the only spinal surgery robots on the market. ExcelsiusGPS® utilizes navigation to couple with various imaging workflows to deliver improved spinal screw placement.
For firms in the industry, the threat for substitution is low due to specialization and medical innovation of devices and the high risk associated with using not cleared devices for orthopedics.
Bargaining Power of Suppliers (High)
Since proper design control is required for the orthopedic medical device industry, resulting in costs from additional engineering and regulatory time, product manufacturing can be expensive. While there are many different techniques to manufacture orthopedic devices, device raw materials can be limited and expensive, especially for Class III devices. There must be considerations made when designing the product for different medical environments, such as sterile environments or magnetic resonance (MR) environments. Products need to be manufactured to tight tolerances to ensure patient safety and proper device interfacing. The FDA also requires the production of medical devices to follow current Good Manufacturing Practice (cGMP). Firms can utilize vertical integration to bring manufacturing of the devices onto the same site of the firm. This is a great way to control the process and quickly remedy quality issues with the manufacturing environment or the product itself that may arise. Through vertical integration, Globus Medical has utilized in-house manufacturing to limit the bargaining power of suppliers and be more competitive in the industry.
Bargaining Power of Buyers (Low)
In the orthopedic medical device industry, the bargaining power of buyers is low due to the high number of physicians and surgeons using the devices. While the surgeons are not the ones directly purchasing medical devices, there is a high number of hospitals that need to order the correct unique product requested by the surgeon or they risk the safety of the patient. As the number of buyers increases, the bargaining power of those buyers decrease. Additionally, there is a low risk for the hospitals to backward integrate products with the requirements put in the place by the FDA. That risk comes from other firms in the industry. However, there will be a time delay to backward integrate specialized products because of the same restrictions put in place by the FDA. Finally, since the industry is populated with specific and differentiated products, bargaining power of buyers remains low due to the ability of certain firms to sell devices exclusive to the firm.
With their three guiding principles, Globus Medical has carved out a large chunk of the orthopedic medical device industry. Yet, there is something missing from their core philosophy that is consistent in Globus Medical’s competitors: Charity and Community / Humanitarian Outreach.
Medtronic is one of Globus Medical’s self-described significant competitors. Their mission is broken into six (6) statements with many addressing the same pillars as Globus Medical’s: “to alleviate pain, growth in areas of biomedical engineering, strive for greatest possible reliability & quality,” etc. However, one statement sticks out to me; “To maintain good citizenship as a company.” Medtronic highlights the statement with employee-led volunteer projects as a larger effort toward a healthier world.8 Zimmer Biomet has a similar guiding principle; “Give back to our communities and people in need.” They call this “Corporate Stewardship” and have programs in philanthropy, educational grants, & community involvement.9
On Globus Medical’s mission website page, they look forward as a company in a fourth quasi-pillar by “Investing in Our Future.”10 They use this section to discuss their emergence into adjacent spaces as new areas of exploration and to encourage collaboration with clinicians to create better products for physicians and ultimately patients.
While I believe their future efforts to improve patient lives will be successful, it could benefit Globus Medical to expand their success to their local community. Even small events, like yoga to battle scoliosis or a “Life Moves Us” 5K run to bring awareness to degenerative disc disease can go a long way to be a bigger part of the neighborhood.
With the support of Porter’s Five Forces Analysis conducted on the orthopedic medical device industry, Globus Medical is a huge force within the industry with their commitment to their three pillars and their ability to be agile in an ever-changing market.
Our Management Team. (2019, November 05). Retrieved December 02, 2020, from https://www.globusmedical.com/about/management-team/
About Us and Our Medical Devices. (2019, December 04). Retrieved November 30, 2020, from https://www.globusmedical.com/about/
Form 10-K, Globus Medical. (2020, February 20). Retrieved November 30, 2020, from https://www.sec.gov/Archives/edgar/data/1237831/000123783120000015/gmed-20191231x10ka.htm
Causes and Procedures for Musculoskeletal System Conditions. (2020, April 17). Retrieved November 30, 2020, from https://www.globusmedical.com/patient-education-musculoskeletal-system-conditions/
Symptoms and Treatment Options of Neck and Arm Pain. (2019, October 08). Retrieved December 02, 2020, from https://www.globusmedical.com/patient-education-musculoskeletal-system-conditions/symptoms/arm-neck-pain/
Musculoskeletal education and Research CENTER (MERC). (2021, February 05). Retrieved March 11, 2021, from https://www.globusmedical.com/healthcare-professionals/education-and-research/
Form 10-K, Globus Medical. (2020, February 20). Retrieved November 30, 2020, from https://www.sec.gov/Archives/edgar/data/1237831/000123783120000015/gmed-20191231x10ka.htm
Medtronic. (2020). Mission. Retrieved December 02, 2020, from https://www.medtronic.com/us-en/about/mission.html
About Us. (2020). Retrieved December 02, 2020, from https://www.zimmerbiomet.com/corporate/about-zimmer-biomet/about-us.html
About Us and Our Medical Devices. (2019, December 04). Retrieved November 30, 2020, from https://www.globusmedical.com/about/