Medtronic 2016 Annual Report Download - page 20

Table of Contents
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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
materials. We will continue to incur expenses as we work with our suppliers to evaluate the source of any conflict minerals in our
products, and compliance with these requirements could adversely affect the sourcing, supply, and pricing of our raw materials.
Our industry is experiencing greater scrutiny and regulation by governmental authorities, which may lead to greater regulation
in the future.
Our medical devices and technologies and our business activities are subject to a complex regime of regulations and an aggressive
enforcement environment, including by the U.S. FDA, U. S. Department of Justice, Health and Human Services-Office of the