Stryker Corporation Capital Budgeting Case Study

Stryker Corporation Capital Budgeting Case Study-14
In spite of the strengths of the system, there are some weaknesses in the system.These include: Does not mention measures that need to be met for Division approval division Terminal value not being used in NPV, IRR and payback period calculations leading to possible undervaluation Overhead in doing excessive documentation for small expenditure requests CERs being done for all projects independent of price tag No brainers are going through a lot of hoops to be approved CER forms are not standardized between M&A and Operational Timelines for CER submission and review not being consistently met (committee and division issues) Division and committee meetings do not seem to be successful (Committee operating as “virtual”) Future success of projects does not seem to be measured Heavy corporate involvement clashes with decentralized organization and entrepreneur culture No process in place to address the differences between the divisions and the committee The current CER system prevailing at Stryker Corp can be evaluated by the following steps: Evaluate the intuitiveness of the CERs towards project completion in: NPV, IRR and Payback calculations (without Terminal value)actual cash flows within and after the 5-7 year period project timelines risks identified and corresponding sensitivity analyses Evaluate the benefit of detailed documentation on the CER forms for small projects checking if small CERs that are similar in nature can be merged addressing team-coordination issues of current system (issues between divisions and committee) Mo Ms of review meetings Laydown plan for CER as soon as it is raised frequent reviews of CERs that are completed, in execution and planned.Even though it seems like the best choice given their circumstances with suppliers, they would be better off financially to continue to buy their PCBs from suppliers.

In spite of the strengths of the system, there are some weaknesses in the system.These include: Does not mention measures that need to be met for Division approval division Terminal value not being used in NPV, IRR and payback period calculations leading to possible undervaluation Overhead in doing excessive documentation for small expenditure requests CERs being done for all projects independent of price tag No brainers are going through a lot of hoops to be approved CER forms are not standardized between M&A and Operational Timelines for CER submission and review not being consistently met (committee and division issues) Division and committee meetings do not seem to be successful (Committee operating as “virtual”) Future success of projects does not seem to be measured Heavy corporate involvement clashes with decentralized organization and entrepreneur culture No process in place to address the differences between the divisions and the committee The current CER system prevailing at Stryker Corp can be evaluated by the following steps: Evaluate the intuitiveness of the CERs towards project completion in: NPV, IRR and Payback calculations (without Terminal value)actual cash flows within and after the 5-7 year period project timelines risks identified and corresponding sensitivity analyses Evaluate the benefit of detailed documentation on the CER forms for small projects checking if small CERs that are similar in nature can be merged addressing team-coordination issues of current system (issues between divisions and committee) Mo Ms of review meetings Laydown plan for CER as soon as it is raised frequent reviews of CERs that are completed, in execution and planned.

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Stryker Corporation Case Study Justin Noakes Executive Summary In 2003, the Stryker Corporation is contemplating a change in their sourcing strategy for printed circuit boards (PCBs), which are used in many of their instruments.

Recently, Stryker's suppliers of PCBs have become less reliable.

Reading up the HBR fundamentals helps in sketching out business case study analysis and solution roadmap even before you start reading the case study.

It also provides starting ideas as fundamentals often provide insight into some of the aspects that may not be covered in the business case study itself.

They want to eliminate this problem by building a PCB production facility and produce the boards in house.

In other words, they want to in-source the production of PCBs.

After finding each year's change in cash flow, I discounted them back to 2003 at a rate of 15%. I also calculated an IRR of 12.01%, and a Payback Period of 4.24 years.

From these calculations, this investment is not a good financial move for the company.

Examines some parts of Stryker Corporation's systems and procedures for approving and authorizing capital spending of many different types, including buildings, machinery, and working capital for existing businesses, as well as transactions with third parties such as acquisitions, joint ventures, and licensing agreements.

Set in early 2007, nearly two years after significant modifications in these systems and procedures.

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