So this is a section of the paper and it is the financial impact section: It should cover the following information How much of the market we can realistically capture, how that would translate into our revenues, and maybe pull that model out until 2025? Use expected overall growth rate to find the CAGR and use that as the YoY growth rate Use similar margins to what Thermo is already experiencing, both for COGS/Rev & Profit margin. If we can find margins specifically for their India operations that would be even better. I whave attached everything already worked on for reference
20 Industry Overview According to the North American Industry Classification System, Thermo Fisher Scientific sits within the medical laboratories industry. The industry aims to provide the healthcare sector with the resources it needs to better diagnose and analyze the cause, severity, and hopeful remediation of a patient’s illnesses. This industry is responsible for doing research about cutting edge biomedical technologies and helping create drugs, vaccines, and diagnostic capabilities. They also build equipment like chromatography instruments, DNA sequencers, and test kits. The industry is also responsible for building software that help make many aspects of healthcare more efficient and cost effective. Thermo Fisher Scientific is dominant in the industry. They trump to their main competitors with revenues of $20.92 billion stemming from several different markets. Competitors seem to be more specifically focused. Agilent Technologies, Danaher, and Bio-Rad are three publicly traded competitors that seem to have a smaller breadth of services. Agilent technologies has revenues of $4.5 billion, with 14,800 employees. They are focused on public research, development, and manufacturing. Danaher technologies is Thermo Fisher’s second biggest rival and they design, manufacture, and market professional, medical, and commercial products and services. They employ 71,000 people and generate revenues of $18.33 billion. Bio-Rad is much smaller, with 8,150 employees. They have revenues of $2.3 billion and they manufacture and distribute life science research and clinical diagnostics products. Thermo Fisher Scientific operates in several segments under different sub-brands. The four main segments that the company competes in are life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products and services. The life sciences solutions segment includes medical and biological research. Thermo Fisher serves this market by creating instruments and consumables that are used for the research and also creates drugs, vaccines, and diagnostic tools. The analytical instruments segment provides software, instruments, and consumables. Products from this segment include chromatography, chemical analysis, and mass spectrometry. The third segment is specialty diagnostics and includes offerings such as test kits, reagents, and instruments for food safety, among others. This segment of the business aims to improve the accuracy of diagnostic procedures and make patient care more effective. The final segment that Thermo Fisher Scientific competes in is laboratory products and services. This division focuses on internally manufacturing products for laboratory use and working with clients to develop their ideas into market-ready solutions. Company Overview Thermo Fisher Scientific’s mission is to “enable (their) customers to make the world healthier, cleaner and safer.” They pursue this mission by manufacturing and developing analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics (MarketLine). Their product portfolio is diverse and serves a wide range of customers under four business segments: Life Sciences Solutions, Specialty Diagnostics, Analytical Instruments and Laboratory Products and Services (MarketLine). Exhibit 4 shows an overview of the company’s current revenue streams and highlights the importance of laboratory products and services for the company’s revenues. Exhibit 5 shows how the company has shifted over time and where they are focusing for future growth. A vital part of the company's success is their investment in research and development, an investment of approximately $900 million, which is much higher than investments made by their competitors. This helps the company deliver a unique value proposition and enables them to continuously develop high impact, innovative products and services and leverage a global scale in emerging markets, all part of their growth strategy. None of this would be possible without the strong culture created at Thermo Fisher for its 70,000 employees. The company has integrated four main values into their culture: integrity, intensity, innovation and involvement. This helps create an environment that believes in the mission of the company and works diligently to achieve their goals. Their genuine commitment is reflected in their achievement of a perfect Corporate Equality Index score for the past three years. Internal Analysis Business Model Due to the sprawling global nature of Thermo Fisher, their business model has grown to be a combination of several popular business models. First, they utilize a pay as you go model by partnering with customers directly. In this case, they might build new custom solutions, provide consulting services, or sell existing equipment. They also utilize wholesale and agency business models. Incorporating these models has allowed them to scale up their business without dramatically increasing their selling costs. It also allows them to break into markets more efficiently and take advantage of distribution systems that have already been established by partner companies. The innovative nature of their products and services allows Thermo to demand revenues without having to offer low risk entry models for customers such as a freemium model or razor-razorblades. Another reason Thermo does not have to utilize those business models is because they compete in an oligopolistic environment with competitors who are motivated to compete on anything except for price. Challenges They Face One challenge Thermo Fisher is constantly facing is how to grow in different international markets. Along with cultural and geographical differences, different countries also have different medical needs. For example, populations are aging much faster than others, which creates different needs for healthcare providers and different needs for laboratories from country to country; populations aging faster likely have more of a need for palliative care than neonatal care. Due to forces like this, Thermo needs to take a myriad of factors into consideration when deciding which markets to target with each of their product lines. A second challenge is how to remain the industry leader in such a fast-paced environment. Laboratory equipment manufacturers are always innovating in order to win or maintain a competitive advantage. Thermo is included in this as well, as they spent an industry high $900 million in research and development in 2017. This is a challenge to Thermo because they must ensure that these large investments pays off or they will suffer extreme losses both financially and competitively. They must find ways to regularly improve their investment process to maintain their leadership position and maximize ROI. A third challenge Thermo faces is pushing healthcare providers, who are their customers, to accept their new products. While healthcare equipment manufacturers innovate rapidly, healthcare providers do not. Even if the product Thermo is selling is a potential upgrade, it is still difficult to sell to healthcare providers because, for many reasons, they are so slow to adapt new methods of operation. If a patient’s life is on the line, why suddenly change a workflow? Implementing a change like this can cause delays or even stoppages to patient care, slowing revenue generation and affecting patient lives. This question presents a constant challenge that all manufacturers need to deal with. Because Thermo grows so much via acquisition, they also have to be wary of antitrust laws. The firm was affected by antitrust law in 2006, which was when Thermo actually merged with Fisher. The FTC deemed this anticompetitive, requiring the conglomerate to divest Fisher’s Genevac division (source). As observed, it is not always to easy to grow by acquisition, and legal intervention can create a need to divest something that could have potentially been a significant source of revenue. More recently, Thermo has had to deal with the responsible usage of its products and the potential effects on its brand. In February of 2019, it was discovered that Chinese officials were using Thermo Fisher’s products to analyze and maintain a genetic database of a small Muslim population that was living in Western China. There had been some ethnic tension between the Chinese and this population, including the usage of re-education camps by the Chinese. Now feeling irresponsible by having their products tied up in this mess, Thermo Fisher decided it would cease all sales of its products in that region. Finally, Thermo is affected by federal drug clearance laws in any country it wants to sell to. In the United States, for example, any drug that can legally be sold must be cleared by the FDA. While Thermo is not a drug manufacturer, it does manufacture products that complement drugs, and without the legality of these drugs some of Thermo’s equipment becomes useless. Growth Strategies The importance of efficiency should not be underestimated, but we believe a continued focus on differentiation, as opposed to cost leadership, will position Thermo Fisher for long-term success. Our suggested growth strategies revolve around the structure the company has already created. In alignment with their 2nd and 3rd pillars of strategy of delivering value by expanding globally and leveraging existing capabilities and acquisitions, we have discerned several high potential opportunities. A vital part of Thermo Fisher’s future is growing internationally, particularly capitalizing on high-growth emerging markets. [Compared to their competitors, as seen in exhibit ###], they have a much higher reliance on North American revenues and should focus on Asia-region revenues to set themselves up for higher growth. They have done a fantastic job of establishing themselves in China, which now accounts for 10% of their total revenues. They’ve been able to achieve success by aligning to China’s 5-year plan, focusing largely on precision medicine, environmental protection, and food safety. We believe this model could be applied to India as well. India is on course to become the 5th largest economy in the world by 2020. Currently, Thermo Fisher is focused on their pharmaceutical industry and improving food safety. We believe they can expand their business further by leveraging their expertise in environmental protection, the importance of which is growing globally. India’s current air quality is unacceptable. 99.3% of the population are subjected to levels of PM2.5 that are deemed unsafe by the World Health Organization (source). New Delhi is considered hazardous, recently surpassing a “severe” to an “emergency” rating (source); a non-smoker can inhale the equivalent of 50 cigarettes in a single day (source). It has even caused some citizens to flee the city. A British medical journal, The Lancet, has estimated air pollution was responsible for almost 10% of the total disease burden in India in 2016 (source); sadly, 77% of pollution related deaths in southeast Asia occur in India (source). Schools even get shut down when pollution becomes too intense; the World Health Organization has recommended keeping windows closed. The government continues to be heavily criticized. Consequently, India’s healthcare budget is expected to rise 217% by 2025. Thermo Fisher can take advantage of this not only in their healthcare business, but by framing environmental protection as a form of preventative healthcare. Beyond healthcare, the pollution has also resulted in very costly operating restrictions for business ranging from construction to industrial plants (source). It would also help the current administration quell criticism because they would be taking clear action by working with Thermo Fisher. In addition to leveraging work already done for China, we believe there are several