Question

Strategic Planning in Health Care Organizations

Porter’s Five Forces focus on competitive forces that affect an organization. In many industries, including the healthcare industry, there are complementary products and services that add values to consumers. For example, the airline and hotel industries are complementary to each other and create values to travelers by transporting them and housing them during their vacations or business trips. It is also common for these complementary businesses to enter into a strategic alliance to promote each other’s products or services. *Give an example of a complementary product or service (“complementor”) in the healthcare industry * Explain why the

“complementors” add values and whether a business alliance between these two complementary businesses is a sound strategic move

. Reference Your paper must be 1–2 pages

Ginter, P. M., Duncan, J. W., & Swayne, L. E. (2013). The strategic management of healthcare organizations (7th ed.). San Francisco, CA: Jossey-Bass.

Answer 1

Strategic Planning in Healthcare Organizations:

Strategic planning is a completely valid and useful tool for guiding all types of organizations, including healthcare organizations. The organizational level at which the strategic planning process is relevant depends on the unit's size, its complexity and the differentiation of the service provided.

Five competitive forces that affect an organization:

1. Threat of New Entrance

2.Rivalary among Existing Competitors

3.Bargaining power of suppliers

4.Bargaining power of buyers

5.Threat of Subsititue Products or services

Affect of the Industry

1.Supply-side economies of scale. These economies arise when firms that produce at larger volumes enjoy lower costs per unit because they can spread fixed costs over more units, employ more efficient technology, or command better terms from suppliers. Supply side scale economies deter entry by forcing the aspiring entrant either to come into the industry on a large scale, which requires dislodging entrenched competitors, or to accept a cost disadvantage. Scale economies can be found in virtually every activity in the value chain; which ones are most important varies by industry.1 In microprocessors, incumbents such as Intel are protected by scale economies in research, chip fabrication, and consumer marketing. For lawn care companies like Scotts Miracle-Gro, the most important scale economies are found in the supply chain and media advertising. In small-package delivery, economies of scale arise in national logistical systems and information technology.

2. Demand-side benefits of scale. These benefits, also known as network effects, arise in industries where a buyer’s willingness to pay for a company’s product increases with the number of other buyers who also patronize the company. Buyers may trust larger companies more for a crucial product: Recall the old adage that no one ever got fired for buying from IBM (when it was the dominant computer maker). Buyers may also value being in a “network” with a larger number of fellow customers. For instance, online auction participants are attracted to eBay because it offers the most potential trading partners. Demandside benefits of scale discourage entry by limiting the willingness of customers to buy from a newcomer and by reducing the price the newcomer can command until it builds up a large base of customers.

3.Customer switching costs. Switching costs are fixed costs that buyers face when they change suppliers. Such costs may arise because a buyer who switches vendors must, for example, alter product specifications, retrain employees to use a new product, or modify processes or information systems. The larger the switching costs, the harder it will be for an entrant to gain customers. Enterprise resource planning (ERP) software is an example of a product with very high switching costs. Once a company has installed SAP’s ERP system, for example, the costs of moving to a new vendor are astronomical because of embedded data, the fact that internal processes have been adapted to SAP, major retraining needs, and the mission-critical nature of the applications

4.Capital requirements. The need to invest large financial resources in order to compete can deter new entrants. Capital may be necessary not only for fixed facilities but also to extend customer credit, build inventories, and fund start-up losses. The barrier is particularly great if the capital is required for unrecoverable and therefore harder-to-finance expenditures, such as up-front advertising or research and development. While major corporations have the financial resources to invade almost any industry, the huge capital requirements in certain fields limit the pool of likely entrants. Conversely, in such fields as tax preparation services or short-haul trucking, capital requirements are minimal and potential entrants plentiful. It is important not to overstate the degree to which capital requirements alone deter entry. If industry returns are attractive and are expected to remain so, and if capital markets are efficient, investors will provide entrants with the funds they need. For aspiring air carriers, for instance, financing is available to purchase expensive aircraft because of their high resale value, one reason why there have been numerous new airlines in almost every region.

5.Incumbency advantages independent of size. No matter what their size, incumbents may have cost or quality advantages not available to potential rivals. These advantages can stem from such sources as proprietary technology, preferential access to the best raw material sources, preemption of the most favorable geographic locations, established brand identities, or cumulative experience that has allowed incumbents to learn how to produce more effi- ciently. Entrants try to bypass such advantages. Upstart discounters such as Target and Wal Mart, for example, have located stores in freestanding sites rather than regional shopping centers where established department stores were well entrenched.

6.Unequal access to distribution channels. The new entrant must, of course, secure distribution of its product or service. A new food item, for example, must displace others from the supermarket shelf via price breaks, promotions, intense selling efforts, or some other means. The more limited the wholesale or retail channels are and the more that existing competitors have tied them up, the tougher entry into an industry will be. Sometimes access to distribution is so high a barrier that new entrants must bypass distribution channels altogether or create their own. Thus, upstart low-cost airlines have avoided distribution through travel agents (who tend to favor established higher-fare carriers) and have encouraged passengers to book their own flights on the internet.

7. Restrictive government policy. Government policy can hinder or aid new entry directly, as well as amplify (or nullify) the other entry barriers. Government directly limits or even forecloses entry into industries through, for instance, licensing requirements and restrictions on foreign investment. Regulated industries like liquor retailing, taxi services, and airlines are visible examples. Government policy can heighten other entry barriers through such means as expansive patenting rules that protect proprietary technology from imitation or environmental or safety regulations that raise scale economies facing newcomers. Of course, government policies may also make entry easier—directly through subsidies, for instance,

Healthcare procedures such as medical diagnostics, treatment decisions, and consequent effecting of these decisions, prevention, communication, and equipment usage can be thought of as iatric in nature (Wickramasinghe & Fad-lalla, 2004). Integral to these iatric procedures is the generating and processing of information (Wickramasinghe & Fadlalla, 2004). The patient naturally provides key information at the time of a clinical visit or other interaction with his/her provider. Such a visit also generates other information including insurance information, medical history, and treatment protocols (if applicable) which must satisfy regulatory requirements, payer directives and, obviously, the healthcare organization’s informational needs. Thus, we see that from a single intervention many forms and types of information are captured, generated, and then disseminated throughout the healthcare system. All this information and its flows must satisfy some common integrity characteristics such as accuracy, consistency, reliability, completeness, usefulness, usability, and manipulability. Consequently, generating a level oftrust and confidence in the information’s content and processes. Since the information flows across various organizational boundaries, the challenge of ensuring information integrity is further compounded because any integrity problems will propagate with ripple effects following the same trajectory as the information itself. Given the high degree of inter-relatedness between the various players, the consequences of poor quality information (such as the cost of information integrity problems) are multiplied and far reaching. This highlights the need for robust, well designed, and well managed HCIS (Wickramasinghe & Fadlalla, 2004). Such a perspective should not be limited to new systems, but rather, equally and perhaps of even more importance should be applied to existing systems as well.

Reference:

1. Gimbert X. Conceptos estratégicos clave, Deusto. Barcelona: Grupo Planeta;2010. p. 55–6
2. Trullenque F. Dirigiendo estratégicamente hacia el futuro. Harv-Deusto Bus Rev. 2007;153:62-7