Medtronic 2015 Annual Report Download - page 28

manufacturers that offer a limited selection of niche products. Development by other companies of new or improved products,
processes, technologies, or the introduction of reprocessed products or generic versions when our proprietary products lose their
patent protection may make our products or proposed products less competitive. In addition, we face competition from
providers of alternative medical therapies such as pharmaceutical companies. Competitive factors include:
•product reliability,
•product performance,
•product technology,
•product quality,
•breadth of product lines,
•product services,
•customer support,
•price, and
•reimbursement approval from health care insurance providers.
We also face competition for marketing, distribution, and collaborative development agreements, for establishing relationships
with academic and research institutions, and for licenses to intellectual property. In addition, academic institutions,
governmental agencies and other public and private research organizations also may conduct research, seek patient protection
and establish collaborative arrangements for discovery, research, clinical development and marketing of products similar to
ours. These companies and institutions compete with us in recruiting and retaining qualified scientific and management
personnel, as well as in acquiring necessary product technologies.
Major shifts in industry market share have occurred in connection with product problems, physician advisories, safety alerts,
and publications about our products; reflecting the importance of product quality, product efficacy, and quality systems in our
industry. In the current environment of managed care, consolidation among health care providers, increased competition, and
declining reimbursement rates, we have been increasingly required to compete on the basis of price. In order to continue to
compete effectively, we must continue to create, invest in, or acquire advanced technology, incorporate this technology into our
proprietary products, obtain regulatory approvals in a timely manner, and manufacture and successfully market our products.
Given these factors, we cannot guarantee that we will be able to compete effectively or continue our level of success in our
industry.
Reduction or interruption in supply and an inability to develop alternative sources for supply or other manufacturing
difficulties, may adversely affect our manufacturing operations and related product sales.
The manufacture of our products requires the timely delivery of sufficient amount of quality components and materials and is
highly exacting and complex, due in part to strict regulatory requirements. We manufacture most of our products at numerous
manufacturing facilities located throughout the world. We purchase many of the components and raw materials used in
manufacturing these products from numerous suppliers in various countries. We have generally been able to obtain adequate
supplies of such raw materials and components. However, for reasons of quality assurance, cost effectiveness, or availability,
we procure certain components and raw materials from a sole supplier. We work closely with our suppliers to try to ensure
continuity of supply while maintaining high quality and reliability. However, we cannot guarantee that these efforts will be
successful. In addition, due to the stringent regulations and requirements of the U.S. FDA regarding the manufacture of our
products, we may not be able to quickly establish additional or replacement sources for certain components or materials. A
reduction or interruption in supply, and an inability to develop alternative sources for such supply, could adversely affect our
ability to manufacture our products in a timely or cost-effective manner and to make our related product sales.
Other problems in the manufacturing process, including equipment malfunction, failure to follow specific protocols and
procedures, defective raw materials and environmental factors, could lead to launch delays, product shortage, unanticipated
costs, lost revenues and damage to our reputation. A failure to identify and address manufacturing problems prior to the release
of products to our customers may also result in quality or safety issues.
In addition, several of our key products are manufactured at a single manufacturing facility, with limited alternate facilities. If
an event occurs that results in damage to one or more of such facilities, we may be unable to manufacture the relevant products
at the previous levels or at all. Because of the time required to approve and license a manufacturing facility, a third-party
manufacturer may not be available on a timely basis to replace production capacity in the event manufacturing capacity is lost.
Moreover, pursuant to the conflict minerals requirements promulgated by the SEC as a part of Dodd-Frank, we are required to
report on the source of any conflict minerals used in our products, as well as the process we use to determine the source of such
18