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MHA 6500. Session Two Dr. Burton. “The understanding that underlies the right decision grows out of the clash and conflict of divergent opinions and out the serious consideration of competing alternatives….Unless one has considered alternatives, one has a closed mind.”

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mha 6500

MHA 6500

Session Two

Dr. Burton

slide2
“The understanding that underlies the right decision grows out of the clash and conflict of divergent opinions and out the serious consideration of competing alternatives….Unless one has considered alternatives, one has a closed mind.”

Peter Drucker

strategy formulation
Strategy Formulation
  • Not a single decision
  • But a series of increasingly more specific questions.
strategy formulation process
Strategy Formulation Process

Strategic Choice

Evaluating Strategic Alternatives

Developing Strategic Alternatives

decision logic of strategy formulation

Directional

Strategies

Competitive

Strategies

Implementation

Strategies

Adaptive

Strategies

Market Entry

Strategies

Ends

Ends

Ends

Ends

Means

Means

Means

Means

Decision Logic of Strategy Formulation

Strategy

Implementation

Strategy Formulation

exhibit 6 5 strategic thinking map hierarchy of strategic decisions and alternatives

Directional

Strategies

Competitive

Strategies

Implementation

Strategies

Adaptive

Strategies

Market Entry

Strategies

Exhibit 6-5: Strategic Thinking Map-Hierarchy of Strategic Decisions and Alternatives
  • Expansion of Scope
  • Diversification
  • Vertical Integration
  • Market Development
  • Product Development
  • Penetration
  • Purchase
  • Acquisition
  • Licensing
  • Venture Capital
  • Investment
  • Strategic Posture
  • Defender
  • Prospector
  • Analyzer
  • Service Delivery
  • Pre-service
  • Point of Service
  • After-service
  • Mission
  • Vision
  • Values
  • Goals
  • Positioning
  • Marketwide
  • Cost leadership
  • Differentiation
  • Market segment
  • Focus/
  • Cost leadership
  • Focus/
  • Differentiation
  • Support
  • Culture
  • Structure
  • Strategic
  • Resources
  • Cooperation
  • Merger
  • Alliance
  • Joint Venture
  • Contraction of Scope
  • Divestiture
  • Liquidation
  • Harvesting
  • Retrenchment
  • Unit Action Plans
  • Objectives
  • Actions
  • Timelines
  • Responsibilities
  • Development
  • Internal
  • Development
  • Internal Venture
  • Maintenance Scope
  • Enhancement
  • Status Quo
exhibit 6 6 related and unrelated diversification by a primary provider

Physician

Group

Hospice

Ambulatory

Care

Diagnostic

Lab

Long-term

Care

Radiation

Treatment

Home

Health

  • General environment
  • Restaurants
  • Health and fitness
  • Parking lots
  • Shopping Centers
  • Office Building
  • Laundry
  • Health Care Environment
  • Pharmaceuticals
  • Medical Supplies
  • Insurance
  • Managed Care
  • Medical Schools
  • Others

Related Diversification

Unrelated Diversification

Exhibit 6-6: Related and Unrelated Diversification by a Primary Provider

Hospital

Outside the Health

Care Industry

Within the Health

Care Industry

exhibit 6 8 patterns of vertical integration among health care organizations

1

2

3

4

5

Exhibit 6-8: Patterns of Vertical Integration Among Health Care Organizations

Strategic

Business Unit

Upstream

Downstream

A

B

C

D

E

F

G

No integration

Total integration

Vertically integrated

Upstream

Multi-hospital

Vertically integrated

Closed

System

A = Wellness/health promotion unit

B = primary care unit

Solid lines depict fully

Internal transfers

C = urgent care unit

D = hospital (inpatient acute care) unit

Dashed lines depict market

And external transfers

E = skilled-nursing unit

F = rehabilitation unit

G = home-health unit

perspective 6 3 focused factory tools for providers of health care services p 228 ginter
Perspective 6 – 3: Focused Factory Tools for Providers of Health Care Services p. 228 Ginter
  • Pay attention to the Customer
  • Focus, Focus, Focus
  • Learn from the Rockettes
  • Resist the Edifice Complex
  • Lower your costs, Don’t raise your prices
  • Use technology wisely
  • Don’t let the Dogma Grind you down
  • Be Ethical
  • Breadth beats depth
  • Don’t get big for Bigness’s sake
  • Measure Results: Your own and your competitors’
positioning strategies exhibit 6 15 porter s matrix
Positioning StrategiesExhibit 6 – 15: Porter’s Matrix

Strategic Advantage

Uniqueness Perceived

By the Customer

Low Cost Position

Differentiation

Overall Cost

Leadership

Marketwide

(broad)

Strategic

Target

Differentiation/Focus

Cost/Focus

Particular

Segment Only

(narrow)

exhibit 7 1 tows matrix
Exhibit 7 – 1: TOWS Matrix

List Internal Strengths

(competitive advantages)

1.

2.

3.

4.

List Internal Weaknesses

(competitive disadvantages

1.

2.

3.

4.

  • 4
  • Future Quadrant
  • Related diversification
  • Vertical integration
  • Market development
  • Product development
  • Penetration
  • 2
  • Internal Fix-it Quadrant
  • Retrenchment
  • Enhancement
  • Market development
  • Product development
  • Vertical integration
  • Related diversification

List External Opportunities

1.

2.

3.

4.

List External Threats

1.

2.

3.

4.

  • 3
  • External Fix-it Quadrant
  • Related diversification
  • Unrelated diversification
  • Market development
  • Product development
  • Enhancement
  • Status quo
  • 1
  • Survival Quadrant
  • Unrelated diversification
  • Divestiture
  • Liquidation
  • Harvesting
  • Retrenchment
slide12

Product Life Cycle

Volume

(sales and profit)

Introduction Takeoff Maturation Obsolescence

Stages

Check p. 273

slide13

Product Life Cycle/Strategic choices

Market development

Product development

Penetration

Enhancement

Status quo

Retrenchment

Divestiture

Unrelated diversification

Volume

(sales and profit)

Market development

Product development

Penetration

Vertical integration

Related diversification

Market development

Product development

Divestiture

Liquidation

Harvesting

Unrelated diversification

Introduction Takeoff Maturation Obsolescence

Stages

Check p. 273

exhibit 7 9 strategic position and action evaluation space matrix p 284
Exhibit 7 – 9: Strategic Position and Action Evaluation (SPACE) Matrix p. 284

Financial Strength

6 ----

5 ----

4 ----

3 ----

2 ----

1 ----

Conservative

Aggressive

Competitive

Advantage

Service Category

Strength

-6 -5 -4 -3 -2 -1

1 2 3 4 5 6

-1 ----

-2 ----

-3 ----

-4 ----

-5 ----

-6 ----

Defensive

Competitive

Environmental Stability

strategic alternatives for space quadrants p 289
Strategic Alternatives for (SPACE) Quadrants p. 289

Financial Strength

  • Conservative
  • Status quo
  • Unrelated Diversification
  • Harvesting

6 ----

5 ----

4 ----

3 ----

2 ----

1 ----

  • Aggressive
  • Related Diversification
  • Market Development
  • Product Development
  • Vertical Integration

Competitive

Advantage

Service Category

Strength

-6 -5 -4 -3 -2 -1

1 2 3 4 5 6

-1 ----

-2 ----

-3 ----

-4 ----

-5 ----

-6 ----

  • Competitive
  • Penetration
  • Enhancement
  • Product Development
  • Market Development
  • Status quo
  • Defensive
  • Divestiture
  • Liquidation
  • Retrenchment

Environmental Stability

exhibit 8 1 the value chain
Exhibit 8 – 1: The Value Chain

Pre-Service

Market/Marketing Research

Target Market

Services Offered/Branding

Pricing

Promotion

Distribution/Logistics

Point-of-Service

Clinical Operations

Quality

Process Innovation

Marketing

Patient Satisfaction

Product Development

Market Development

Penetration

Enhancement

Differentiation

After-Service

Follow-up

Clinical

Marketing

Follow-on

Clinical

Marketing

Service Delivery

Organizational Culture

Shared Assumptions Shared Values Behavioral Norms

Organizational Structure

Function Division Matrix

Support Activities

Strategic Resource

Financial Human Information Technology

Source: Adapted from Michael Porter

exhibit 8 2 decision logic for the value adding strategies
Exhibit 8 – 2: Decision Logic for the Value Adding Strategies

Ends

Means

  • Directional Strategies
  • Adaptive Strategies
  • Market Entry Strategies
  • Competitive Strategies

Value Adding

Strategies

  • Service Delivery
  • Strategies
  • Pre-service
  • Point-of-Service
  • After-Service

Ends

  • Support Strategies
  • Organizational Structure
  • Organizational Culture
  • Strategic Resources

Means

Ends

  • Unit Action Plans
  • Objectives
  • Actions
  • Timelines
  • Responsibilities

Means

exhibit 8 8 conceptual model of service quality
Exhibit 8 – 8: Conceptual Model of Service Quality

CONSUMER

Word-of-Mouth

Communications

Personal Needs

Past Experience

Expected Service

Gap 5

Perceived Service

MARKETER

Service Delivery

(including pre-

and postcontacts)

External

Communications

to Consumers

Gap 3

Translation of

Perceptions into

Service Quality

Specifications

Gap 1

Gap 4

Management

Perceptions of

Consumer

Expectations

exhibit 9 1 consistency in value adding support strategies
Exhibit 9 – 1: Consistency in Value Adding Support Strategies

Organizational

Culture

Organizational

Structure

Strategic

Resources

Strategic Leadership

exhibit 9 2 strategic thinking map for developing value adding support strategies
Exhibit 9-2: Strategic Thinking Map for Developing Value Adding Support Strategies

Characteristics/Attributes

Evaluation

Value Adding Support

Strategies

Results of

Internal Analysis

Requirements

of Selected

Strategies

Comparison of

Strategy Requirements

and Internal Analysis

Maintain

Change

Organizational Culture

Organizational Structure

Strategic Resources

organizational culture
Organizational Culture
  • Shared assumptions
  • Shared values
  • Behavioral norms

Learned

Shared

Subjective and Objective

perspective 9 2
Perspective 9 – 2

Strategy

Leadership Attributes

Culture

Control - focused on certainty, predictability, safety, accuracy, and dependability. Value is to preserve, grow, and ensure the well-being and success of the organization. This culture is centered on organizational goal attainment

  • Status quo
  • Enhancement
  • Market-share expansion
  • Market development
  • Defender posture
  • Cost/Leadership
  • Authoritative
  • Directive
  • Conservative
  • Cautious
  • Definitive
  • Commanding
  • Firm

Collaboration – focused on synergy, unity, close connections with the customer, and intense dedication to the culture is centered on unique customer goal attainment.

  • Enhancement – high customization
  • Enhancement –customer relationships
  • Vertical integration
  • Penetration
  • Differentiation
  • Alliances
  • Analyzer posture
  • Team builder
  • First among equals
  • Coach
  • Participative
  • Integrator
  • Trust builder

Competence – focused on distinction, ensuring the accomplishment of unparalleled, unmatched products and services. This culture is centered on conceptual goal attainment.

  • Product development
  • Differentiation
  • Prospector posture
  • Market niche
  • Enhancement – innovation, quality
  • Standard setter
  • Visionary
  • Assertive, convincing persuader
  • Challenger of others
  • Catalyst
  • Cultivator
  • Harvester
  • Commitment builder
  • Steward
  • Appeal to high-level vision

Cultivation – focused on enrichment, ensures the fullest growth of the customers, fulfillment of the customer’s potential, the raising up of the customer. This culture is focused on value-centered goal attainment.

  • Analyzer posture
  • Differentiation - focus
  • Enhancement – innovation, customization
structure
Structure
  • Functional Structure
  • Divisional Structure (SBU)
  • Matrix
exhibit 9 3 functional structure combined with process structure
Exhibit 9 – 3: Functional Structure Combined with Process Structure

CEO

Functional

Structure

Marketing

Human

Resources

Clinical

Operations

Finance &

Accounting

Information

systems

Maintenance;

Housekeeping

Functional

Structure

Medicine

Surgery

Obstetrics

Pediatrics

Clinical

Services

Process

Structure

Pre-Op

Preparation

Anesthesia

Prep & Adm.

Surgical

Procedure

Post-op

Recovery

  • Functional Structure Strategic Advantages
  • Builds a high degree of specialization
  • Fosters efficiency
  • Centralizes control and decision making
  • Develops functional expertise
  • Functional Structure Strategic Disadvantages
  • Fosters “silo thinking” – narrow specialization
  • Slows down decision making
  • Makes horizontal communication difficult
  • Makes coordination difficult
  • Limits the development of general managers
exhibit 9 4 divisional structure product with geographic divisions
Exhibit 9 – 4: Divisional Structure – Product with Geographic Divisions

CEO

  • Corporate Services
  • Legal
  • Planning
  • Marketing
  • Administrative Services

Product

Structure

Insurance

Foundation

Hospitals

Affiliated

Services

Medical

Management

Professional

Services

Geographic

Structure

Western

Division

Southern

Division

Eastern

Division

  • Divisional Structure Strategic Advantages
  • Forces decision making down the organization
  • Allows different strategies among divisions
  • Fosters improved local responsiveness
  • Places emphasis on the geographic region or product/service
  • Improves functional coordination within the division
  • Identifies responsibility and accountability
  • Develops general managers
  • Divisional Structure Strategic Disadvantages
  • Makes it difficult to maintain a consistent image/reputation
  • Adds layers of management
  • Duplicates services and functions
  • Requires carefully developed policies and decision-making guidelines
  • Creates competition for resources
exhibit 9 5 matrix structure

CEO

CLINICAL

Marketing

Human

Resources

Legal

Finance &

Accounting

Information

systems

Maintenance;

Housekeeping

Medicine

Surgery

Obstetrics

Pediatrics

Clinical

Services

Exhibit 9 – 5: Matrix Structure
  • Matrix Structure Strategic Advantages
  • Develops functional expertise
  • Allows for a variety of product/project developments
  • Allows for the efficient use of functional expertise
  • Encourages rapid product development
  • Fosters creativity and innovation
  • Matrix Structure Strategic Disadvantages
  • Causes difficulties in management
  • Violates the unity of command principle
  • Creates coordination and communications problems
  • Requires negotiation and shared responsibility
  • Allows for confusion on priorities
strategic resources
Strategic Resources
  • Financial Resources
    • Capital acquisition-equity and debt
    • Other forms of debt acquisition
    • Fund-raising and philanthropy
  • Human Resources
  • Information Resources
  • Technologies
    • Facilities
    • Equipment
slide28
“A strategy that cannot be evaluated in terms of whether of not it is being achieved is simply not a viable or even useful strategy.”

C. H. Roush and B. C. Ball

exhibit 11 1 strategic fit
Exhibit 11 – 1: Strategic Fit
  • Strategy
  • Directional strategies
  • Adaptive strategies
  • Market entry strategies
  • Competitive strategies
  • Service Delivery
  • Strategies
  • Pre-service
  • Point-of-service
  • After-service
  • Support Strategies
  • Culture
  • Structure
  • Strategic Resources

Strategic

Leadership

  • Unit Action Plans
  • Objectives
  • Actions
  • Timelines
  • Responsibilities
  • Budgets
exhibit 11 2 the concept of control
Exhibit 11 – 2: The concept of control

Set Objectives

Or

Redefine

Objectives

Measure

Actual

Performance

Compare

Objectives

With

Performance

Determine

Reasons

For

Deviation

Take

Corrective

Action

the characteristics of control
The Characteristics of Control
  • Based on accurate, relevant, and timely information
  • Directed at controlling only the strategy-critical elements
  • Flexible
  • Cost-effective
  • Simple and easy to understand
  • Timely
  • Emphasize the exceptions
exhibit 11 3 the concept of control and a framework for strategic control
Exhibit 11 – 3: The concept of control and a framework for strategic control

Strategic Control

Concept Control

Establish or confirm performance

Standards – Mission, Vision

Values, and Goals

Set objectives or

redefine objectives

Measure performance

Measure organizational

performance

Compare performance

with objectives

Compare performance

with standards

Determine reasons

for deviations

Are strategic assumptions still valid?

External factors

Internal factors

Are the Directional Strategies

still appropriate?

Are the Adaptive Strategies

still appropriate?

Are theMarket Entry Strategies

still appropriate?

Are the Competitive Strategies

still appropriate?

Are the Implementation Strategies

still appropriate?

Take Corrective Action

Take Corrective Action