Chap 4-SM

8/12/2019 Chap 4-SM

1/52

CH PTER IVINTERNAL ENVIRONEMNTALANALYSIS and COMPETITIVE

ADVANTAGE

Minakshi Gautam

Assistant Professor

IIHMR, Delhi

8/12/2019 Chap 4-SM

2/52

Methods adopted from automobile industryLean Design and Lean

thinking

It involves seeing organization as a value chain each activity/process should add value for patients

8/12/2019 Chap 4-SM

3/52

MUDA7 wastes

8/12/2019 Chap 4-SM

4/52

8thWaste:

8/12/2019 Chap 4-SM

5/52

Learning Objectives

Understand the role of internal environmental analysis in identifying

thebasis for sustained competitive advantage.

Describe the organizational value chain, including the components of

the service delivery and support activities.

Understand the ways in which value can be created at various places

in the organization with the aid of the value chain.

Use the value chain to identify organizational strengths and

weaknesses

8/12/2019 Chap 4-SM

6/52

Learning Objectives

Determine the competitive relevance of each strength and weakness

with the aid of a series of carefully formulated questions.

Describe how competitively relevant strength and weaknesses can be

used to suggest appropriate strategic actions.

8/12/2019 Chap 4-SM

7/52

Identifying Competitive Advantage

So far, focus of situational analysisexternal environment

Attempted to answer the first of three strategic questions

concerning situational analysis What should theorganization do?

Next step Situational analysis emphasis shifts to

ORGANIZATION and establishing COMPETITIVE

ADVANTAGE.

.

8/12/2019 Chap 4-SM

8/52


Experts writing on Competitive Advantage have concluded

that successful organizations focusrelentlessly on competitive

advantage . (they) strive to widen the performance gap

between themselves and competitors. They are not satisfied

with todayscompetitive advantagethey want tomorrows.

Health care strategists often must think about business as well

as medical issuesin pursuing competitive advantage.

8/12/2019 Chap 4-SM

9/52


Developing a better product, charging a lower price, or

delivering better service does not guarantee success.

Competitive advantage requires an organization to develop adistinctivenessthat competitors do not have and cannot easily

imitate.

Therefore, an answer to second strategically relevant question

of situational analysisWhatcan the organization do?

8/12/2019 Chap 4-SM

10/52

A stable environment allowed static strategies to be

successful.

In todays environment, the ability to develop a

sustained competitive advantage is increasingly rare.

Sustained competitive advantage is the direct result of

an enduring value.

This reality makes internal environmental factorsimportant.

8/12/2019 Chap 4-SM

11/52

They must anticipate what the rapidly changing

environment will be like.

Traditionally, the focus has been on organizational

strengths and weakness.

Internal environmental analysis is much like external

environmental analysis except the focus in on the

organization rather than environmental forces.

8/12/2019 Chap 4-SM

12/52

Analyzing the Internal Environment

Create value for present and prospective customers and

other stakeholders.

The organizational value chain is a useful tool for

creating value By evaluating functional areas such as

Clinical Operations

Information Systems

Marketing

Clinical Support

Human resources

Financial administration and so on

8/12/2019 Chap 4-SM

13/52

Value Creation in Healthcare Organizations

Value is defined as the amount of satisfaction received

relative to the price paid for a health care service.

For e.g. patient going to cosmetic surgeon and payinghigh price vs. patient going to a free family practice

clinic.

Therefore, value is the perceived relationship betweensatisfaction and price, it is not based solely on price.

8/12/2019 Chap 4-SM

14/52

The Value Chain

PRE

SERVICEMarket/Marketing

Research

Target Market

Services offered/

Branding

Pricing

POINT- OF

SERVICE

Clinical Operations

Quality

Process Innovation

Marketing

Patient Satisfaction

AFTERSERVICE

Follow-up

Clinical

Marketing

Billing

Follow-onClinical

Marketing

AD

D

V

A

L

UE

A

D

D

V

A

L

U

E

ORGANIZATIONAL CULTURE

Shared Assumptions, Shared Values, Behavioral Norms

ORGANIZATIONAL STRUCTURE

Function, Division, Matrix

STRATEGIC RESOURCES

Financial, Human, Information, Technology

S

ER

V

I

C

E

D

E

L

IV

E

R

Y

S

U

P

P

O

RT

A

C

T

I

V

I

T

IY

8/12/2019 Chap 4-SM

15/52

Organizational Value Chain

The organizational value chain is an effective means of

illustrating how and where value may be created.

Value may be created in the service delivery sub systemand by effective use of support subsystem.

Service delivery activities fundamental value creation

activities

They are supported by activities that facilitate and

improve service delivery

8/12/2019 Chap 4-SM

16/52


Service delivery has three elements pre service, point of

service and after service.

It includes primarily operational processes and marketingactivities.

Organizational culture, organizational structure and strategic

resourcesare the subsystems that support service delivery.

It happens by ensuring an inviting and supporting atmosphere,

an effective organization, and sufficient resources such as

finances, highly qualified staff, information systems and

appropriate facilities and equipment.

8/12/2019 Chap 4-SM

17/52


Service Delivery Activities:

Can create value and significant advantages over competitors.

Support Activities

If the organizational culture is service oriented patients can feel it when they walk

in the door.

The organizational structure can increase the patient satisfaction by effectively

and efficiently facilitating the service delivery.

Structure should have enough standardization and enough flexibility.

Strategic resources are important to overall perception of value- employees with

proper skills, up to date information system, accessible parking lot etc has

positive impact on patient satisfaction.

Goals, values and behaviors of all employees must be integrated towards thecommon objective of patient satisfaction

8/12/2019 Chap 4-SM

18/52

Description of Value Chain Components

Value Chain

Component

Description

Service Delivery The activities in the value chain that are

directly involved in ensuring access to,

provision of, follow up for health

services.

Pre Service

Market/Marketing

research

Determine the services that create value

prior to the actual delivery of health

services, determine appropriate targetmarket.

Target Market The process of identifying recognizable

groups (segments) that make up the

market and selecting appropriate groups

upon which to focus.

8/12/2019 Chap 4-SM

19/52


Value Chain

Component

Description

Services offered/

Branding

Information dissemination to present to

prospective patients and other

stakeholders regarding the range of

available services.Pricing Charge schedule for available services

Distribution/ Logistics Activities and systems that facilitate

patient entry into the service delivery

system including appointments andregistrations

Promotion Activities that ensure all the elements

needed to deliver health services are

available at the appropriate place ata ro riate time

8/12/2019 Chap 4-SM

20/52


Value Chain Component Description

Point-of-Service

Clinical operations

Quality

Process Innovation

Those service delivery activities that

create value at the point where services

are actually delivered.

The activities that convert the humanand non human resources into health

services

Actual provision of health services to

the individual patientActivities and groups of activities that

are designed specifically to improve the

quality and quantity of health services.

8/12/2019 Chap 4-SM

21/52

Description of Value Chain ComponentsValue Chain

Component

Description

Marketing

Patient

Satisfaction

Activities to offer new products, seek new

customers, provide better services delivery

and cause services to be perceived as higher

value.After-Service

Followup

ClinicalMarketing

Activities that create value after the patient

has received the health services.Activities designed to determine the

effectiveness of or the patient satisfaction with

health services received.

Activities that assist in determining what other

service need to be delivered.

8/12/2019 Chap 4-SM

22/52


Value Chain

Component

Description

Billing Value creating activities that ensure more

understandable and efficient billing

procedures

Follow-onClinical

Marketing

Activities that facilitate entry into anothervalue chain (from hospital to home care, etc.)

8/12/2019 Chap 4-SM

23/52


Value Chain

Component

Description

Support Services The activities in the value chain that are

designed to aid in the efficient and

effective delivery of health services.

Organizational Culture The overarching environment withinwhich the health services organization

operates.

Shared Assumptions The assumptions employees and others

share in the organization regarding allaspects of service delivery. (e.g. needs of

patients, goals of organization)

V l Ch i D i ti

8/12/2019 Chap 4-SM

24/52

Value Chain

Component

Description

Shared values The guiding principles of the

organization and its employees.

The understanding people in the

organization have regarding excellence,

risk taking, etc.

Behavioral norms Understandings about behavior in the

organization that can create value for

patients.

Organizational

Structure

Those aspects of organization structure

that are capable of creating value for

customers/ patients

Function Structure based on process or activities

used by employees (e.g. surgery, finance,

human resource)

V l Ch i D i ti

8/12/2019 Chap 4-SM

25/52

Value Chain

Component

Description

Division Major units operate relatively

autonomously (e.g. hospital division,

outpatient division, northwest division)

Matrix Two dimensional structure where more

than the single authority structure

operates simultaneously. (e.g.

interdisciplinary team with

representatives from medicine, nursing,

administration)

Strategic Resources Value creating financial, human,

information resources and technologynecessary for the delivery of health

services.

Financial Financial resources required to provide

the facilities, equipment, specialized

V l Ch i D i ti

8/12/2019 Chap 4-SM

26/52

Value Chain

Component

Description

Human Individuals with the specialized skills

and commitment to deliver health

services.

Information Hardware, software and information

processing system needed to support the

delivery of health services.

Technology The facilities and equipment required to

provide health services

8/12/2019 Chap 4-SM

27/52

Identifying current and potential competitive

advantage

Assessing current and potential competitively relevant strengths and

weaknesses is the goal of internal environmental analysis.

Competitively relevant strengths are the pathways to sustained competitive

advantage

Strengths and weakness may be objective or subjective as well as absolute orrelative.

Some strengths possessed by a health care organization are clear by objective

standards. These are clear and easily recognizable. E.g. a particular location.

Some weaknesses can also be easily recognizable and clear e.g. excessivefinancial debt.

At times, a strength or weakness may be subjective.

8/12/2019 Chap 4-SM

28/52


advantage

At times, a strength or weakness may be subjective. E.g. opinion ofthe people.

The management team may think that the philosophyof the boardof directors is more conservative than that of other organizations

even though there are no concrete data to support the assertion.

Sometimes organizational strengths and weakness are absolute orrelative.

These are not so obvious and can only be determined in relationshipto strengths and weaknesses of primary competitors.

E.g. renowned health centre loses famous surgeon to a local hospital(relative weakness)

8/12/2019 Chap 4-SM

29/52


advantage

Sometimes organizational strengths and weakness are absolute.

The Johns Hopkins University School of Medicine is recognized

worldwide as a leader in medical education.

Strengths and weaknesses are easier to identify if one thinks in terms

of organizational resources, competencies and capabilities.

8/12/2019 Chap 4-SM

30/52

A. RESOURCES The resource based view of strategy argues that valuable,

expensive or difficult to copy resources provide a key tosustainable competitive advantage.

Resources are the stocks of human and nonhuman factors that are

available for use in producing goods and services.

Resources may be tangible, as in case of land etc. and may beintangible e.g. intellectual property, reputation, and goodwill.

Robert Kaplan and David Norton point out that unl ike f inancialand physical resources intangible resources are hard for

competitors to imi tate. Thus making them powerful source of

sustainable competi tive advantage.

Strengths and weaknesses are easier to identify if one thinks in terms of

organizational resources, competencies and capabil i ties.

8/12/2019 Chap 4-SM

31/52

A. RESOURCES

Furthermore, according to a Harris Interactive Health Care Poll, agood reputation and trustedphysiciansrecommendation are twoof most important indicators of quality of medical care.

These factors ranked above more tangible indicators of resources,including location, appearances, etc,

8/12/2019 Chap 4-SM

32/52

B. COMPETENCIES

Competency is defined as knowledge and skills that may be a

powerful source of sustained competitive advantage.

It is about ideas and intellectual know-how.

The organization must possess threshold competencies- the

minimally required knowledge and skills necessary to compete in

a particular area.

E.g. all organizations offering cardiac services may possess

threshold competencies, but only one or two will develop the

knowledge and skills to the point that it becomes distinctive

competency.

8/12/2019 Chap 4-SM

33/52

C. CAPABILITIES

Capabilities are a health organizationsability to deploy resources and

competencies, usually in combination.

Coordination of resources and competencies is another potential

source of sustained competitive advantage.

Some assets never create value by themselves, they need to be

combined with other assets.

E.g. investment in IT (a resource) have little value unless

complemented with effective HR training (competencies)

8/12/2019 Chap 4-SM

34/52

C. CAPABILITIES

It is likely that two or more organizations competing in the same

health care market could have same resources and competencies.

In such case, competitive advantage is likely to be the result of

different capabilities a unique culture, strategic leadership, set ofprocesses.

8/12/2019 Chap 4-SM

35/52

Strategic Thinking Map for Discovering Competitive Advantages and

Disadvantages

PRE

SERVICE

POINT- OF

SERVICE

AFTER

SERVICE

ORGANIZATIONAL CULTURE

ORGANIZATIONAL STRUCTURE

STRATEGIC RESOURCES

Step 1

Identify Strengths and Weaknesses

Service Delivery

Strength and

Weaknesses

Support Activities

Strength and

Weaknesses

Value

Rare

Imitable

Sustainable

Competitively

relevant

strengths

Competitively

relevant

Weaknesses

Step 2

Evaluate competitive relevance of

strengths and weaknesses

Competi

tiveadvantag

e and

Competi

tive

Disadva

ntages

Step 3

Focus on

Competitive

Strengths and

Competitive

Weaknesses

8/12/2019 Chap 4-SM

36/52

Strengths must have value, be rare, be difficult to imitate and be

sustainable in order to create competitive advantage.

Competitive relevance is determined by critically considering four

important questions;

Question of Value: Is the resource, competency, or capability of value to

customers?

Question of Rareness: Is this organization the only one that possess the resource,competency and capabilities or do many or all of its competitors possess it?

Question of Imitability: Is it easy or difficult to duplicate the resource,

competency or capability?

Question of Sustainability: Can the resource, competency or capability bemaintained over time?

Organizational Strengths

8/12/2019 Chap 4-SM

37/52

Strategic Thinking Map for the possible combinations of 4

questions regarding strengths and implications

Is theValue of

Strength

High or

Low

(H/L)

Is thestrength

rare (Y/N)

Is thestrength

easy or

difficult to

imitate (E/D)

Can thestrengt

h be

sustaine

d (Y/N)

Implications

H N E Y No competitive advantages.

Most competitors have the

strength and those that do

not can develop it easily and

sustain it. Because the

strength is widely possessed

and can be sustained it is

likely that it already has

become a minimum

condition for long term

success.

8/12/2019 Chap 4-SM

38/52



Is theValue of

Strength

High or

Low

(H/L)

Is thestrength

rare (Y/N)

Is thestrength

easy or

difficult to

imitate (E/D)

Can thestrengt

h be

sustaine

d (Y/N)

Implications

H N E N No competitive advantages.

Most competitors have the

strength and it is easy to

develop. However, the

strength generally is not

sustainable. If the

organization is the only

organization in the service

area that cannot sustain the

strength, it will become a

short term competitive

8/12/2019 Chap 4-SM

39/52



Is theValue of

Strength

High or

Low

(H/L)

Is thestrength

rare (Y/N)

Is thestrength

easy or

difficult to

imitate (E/D)

Can thestrengt

h be

sustaine

d (Y/N)

Implications

H N D Y No competitive advantages.

Many competitors possess

the strength but it is difficult

to develop, so care should

be taken to maintain this

strength. Because the

strength is widely possessed

and can be sustained, it is

likely that it already has

become the minimum

condition for long term

8/12/2019 Chap 4-SM

40/52



Is theValue of

Strength

High or

Low

(H/L)

Is thestrength

rare (Y/N)

Is thestrength

easy or

difficult to

imitate (E/D)

Can thestrengt

h be

sustaine

d (Y/N)

Implications

H N D N No competitive advantage.

Many competitors possess

the strength but it is difficult

to develop and those who do

possess it will not be able to

sustain the strength. If the

organization is the only

organization that cannot

sustain the strength it will

become the long term

competitive disadvantage.


8/12/2019 Chap 4-SM

41/52

g g p pquestions regarding strengths and implications

Is the

Value of

Strength

High or

Low

(H/L)

Is the

strength

rare

(Y/N)

Is the

strength

easy or

difficult to

imitate

(E/D)

Can the

strength

be

sustaine

d (Y/N)

Implications

H Y E Y Short term competitive

advantage. Because the

strength is valuable and rare,

competitors will do what is

necessary to develop this easy

to imitate strength. The

organization should exploit

this short term advantage butshould not base the long term

strategies on this type of

strength. Overtime, this

strength may become a

minimum condition for longterm success.


8/12/2019 Chap 4-SM

42/52

g g p pquestions regarding strengths and implications

Is the

Value of

Strength

High or

Low

(H/L)

Is the

strength

rare

(Y/N)

Is the

strength

easy or

difficult to

imitate

(E/D)

Can the

strength

be

sustaine

d (Y/N)

Implications

H Y E N Short term competitive

advantage but not a source of

long term competitive

advantage. The strength is

easy to imitate but cannot be

sustained. The organization

should not base long term

strategies on this type ofstrength but may obtain

benefits of short term

advantage.

8/12/2019 Chap 4-SM

43/52

8/12/2019 Chap 4-SM

44/52



Is theValue of

Strength

High or

Low

(H/L)

Is thestrength

rare

(Y/N)

Is thestrength

easy or

difficult to

imitate

(E/D)

Can thestrength

be

sustaine

d (Y/N)

Implications

Although rare and difficult to

imitate, the strength cannot be

sustained. This strength

should be exploited for as

long as possible.

8/12/2019 Chap 4-SM

45/52

How to chart value creating strengths and value

reducing weaknesses (e.g. of one component from

Medtronics)

Value Chain Component Value creating Strength Value Reducing Weakness

Service Delivery

Pre-service Reputation as leading biomedical

engineering company

Established presence in the marketFounded in 1949

Market leader in selected segments

(e.g. implantable cardiac rhythm

devices)

Operations in more than 120

countries world wide

Vulnerability to diverse

cultural mores and regulatory

constraints.Subject to high risk of

litigation over patents,

trademarks and product

liability claims.

8/12/2019 Chap 4-SM

46/52


questions regarding weaknesses and implications

Is the

Weakness of High

or Low

(H/L)

Is the

weaknessCommon

(Not Rare)

among

competitor

s (Y/N)

Is the

weaknessEasy or

Difficult

to

correct?

(E/D)

Can

competitors sustain

their

advantage

?

(Y/N)

Implications

H Y E Y No competitive disadvantage.

Although a weakness of the

organization, most other

competitors are also weak in this

area. However the weakness is easy

to correct and competitors willlikely work to correct the weakness.

If organization fails to correct

weakness, competitors could

achieve a short term competitive

advantage. Can become minimum

condition for long term success

Is the Is the Is the Can Implications

8/12/2019 Chap 4-SM

47/52

Weaknes

s of High

or Low

(H/L)

weakness

Common

(Not Rare)

among

competitors (Y/N)

weakness

Easy or

Difficult

to

correct?(E/D)

competito

rs sustain

their

advantage

?(Y/N)

p

H Y E N No competitive disadvantage .

Other competitors are also weak.

Easy to correct. Most competitors

are likely to work to correct the

weakness. Therefore no

organization can sustain their

advantage.

H Y D Y No competitive disadvantage. Most

other competitors are also weak.

Difficult to correct. However,situation is dangerous. Important to

ensure that competitors dont

overcome this first. If competitors

correct the weakness and continue

to sustain their advantage the

weakness could become long termcom etitive disadvanta e.


8/12/2019 Chap 4-SM

48/52

Weaknes

s of High

or Low

(H/L)

weakness

Common

(Not Rare)

among

competitors (Y/N)

weakness

Easy or

Difficult

to

correct?(E/D)

competito

rs sustain

their

advantage

?(Y/N)

p

H Y D N No competitive disadvantage . Most

other competitors are also weak in

this area. Difficult to correct.

Chronic, almost all competitors

have it. Corrections in the weakness

tend to erode over time.

H N E Y Short-term competitive

disadvantage. Most competitors not

weak in this area. Easy to correct.

Organization should correct itquickly. Correcting is likely to

become a minimum condition for

long term success.


8/12/2019 Chap 4-SM

49/52

Weaknes

s of High

or Low

(H/L)

weakness

Common

(Not Rare)

among

competitors (Y/N)

weakness

Easy or

Difficult

to

correct?(E/D)

competito

rs sustain

their

advantage

?(Y/N)

H N E N Short term competitive

disadvantage. Competitors not

weak in this area. Weakness easy to

correct. Organization should move

quickly to correct it. Likely that all

competitors correct it and therefore

cannot sustain any advantage.

H N D Y Serious competitive disadvantage.

Weakness is valuable, most

competitors do not have it. Difficultfor organization to correct it.

Competitors can sustain their

advantage. May threaten the

survival of the organization.

8/12/2019 Chap 4-SM

50/52

Is the

Weaknes

s of High

or Low(H/L)

Is the

weakness

Common

(Not Rare)among

competitor

s (Y/N)

Is the

weakness

Easy or

Difficultto

correct?

(E/D)

Can

competito

rs sustain

theiradvantage

?

(Y/N)

Implications

H N D N Short term competitive

disadvantage. Weakness is valuable,

most competitors do not have it.

Difficult for organization to correct

it. However, competitors cannot

sustain the advantage. Until it

becomes the weakness for most

competitors in service area orweakness corrected by the

organization., it will continue to be

a Serious disadvantage.

8/12/2019 Chap 4-SM

51/52

Strategic Implications of Competitively Strengths and

Weaknesses (Medtronics)

Competitively Relevant Strength or

Weakness

Strategic Implications

Strengths

Market leader in selected business

segments

Economies of scale could be leveraged over competitors

with smaller market shares.

Integrated product line focused on

manufacture and sales of device based

medical therapies

Although competitors are strong and have comprehensive

product lines, Medtronic appears more focused on

manufacture and sale of integrated line of device basedmedical strategies

Entrepreneurial culture History and performance has established firm reputation

for innovation

Numerous patents, trademarks, and trade

names

Legal protection of products and product names can

constitute important aspect of differentiation

Strong intellectual capital underlying keyproducts Same as for patents and trademarks

Weaknesses

Ongoing legal claims that could prove a

threat to financial viability

Settlements agains the company could result in serious

financial consequences

8/12/2019 Chap 4-SM

52/52

Careful analysis of the internal environment provides a

better understanding of where strategic leaders should

focus their efforts.

Where they should be careful to avoid vulnerability

relative to competitors

It is not possible to be everything to everyone.

Date post:	03-Jun-2018
Category:	Documents
Upload:	nuzhat-fatema
View:	214 times
Download:	0 times

Chap 4-SM

Documents