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Session two MHA 6500

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Session two MHA 6500 Powered By Docstoc
					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.”
                  Peter Drucker
          Strategy Formulation
• Not a single decision
• But a series of increasingly more specific
  questions.
     Strategy Formulation Process
                                                            Strategic Choice




                        Evaluating Strategic Alternatives




Developing Strategic Alternatives
              Decision Logic of Strategy Formulation

                                                                        Strategy
                               Strategy Formulation                  Implementation



Directional       Adaptive              Market Entry   Competitive   Implementation
Strategies        Strategies            Strategies     Strategies    Strategies

Ends              Means

                    Ends                   Means

                                            Ends        Means

                                                         Ends         Means
   Exhibit 6-5: Strategic Thinking Map-
   Hierarchy of Strategic Decisions and Alternatives

Directional           Adaptive        Market Entry           Competitive        Implementation
Strategies            Strategies      Strategies             Strategies         Strategies
              Expansion of Scope      Purchase            Strategic Posture   Service Delivery
•Mission      •Diversification        •Acquisition        •Defender           •Pre-service
              •Vertical Integration   •Licensing          •Prospector         •Point of Service
•Vision       •Market Development     •Venture Capital    •Analyzer           •After-service
              •Product Development     Investment
•Values       •Penetration                                Positioning         Support
                                      Cooperation         Marketwide          •Culture
•Goals        Contraction of Scope    •Merger             •Cost leadership    •Structure
              •Divestiture            •Alliance           •Differentiation    •Strategic
              •Liquidation            •Joint Venture                          Resources
              •Harvesting                                 Market segment
                                      Development         •Focus/             Unit Action Plans
              •Retrenchment                                                   •Objectives
                                      •Internal           Cost leadership
                                      Development         •Focus/             •Actions
              Maintenance Scope                                               •Timelines
                                      •Internal Venture   Differentiation
              •Enhancement                                                    •Responsibilities
              •Status Quo
Exhibit 6-6: Related and Unrelated Diversification by a Primary
Provider
                                     Physician
                                      Group
                                                    Ambulatory
                           Hospice
                                                      Care

             Diagnostic                                       Long-term
                Lab                                             Care


     Radiation                                                            Home
     Treatment                       Hospital                             Health


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


         Related Diversification
         Unrelated Diversification
   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
       1

        2
Total integration

 Vertically integrated
       3
      Upstream


    Multi-hospital
       4
 Vertically integrated


     Closed
       5
     System

   A = Wellness/health promotion unit
   B = primary care unit
   C = urgent care unit                                                     Solid lines depict fully
                                                                            Internal transfers
   D = hospital (inpatient acute care) unit
   E = skilled-nursing unit                                                 Dashed lines depict market
                                                                            And external transfers
   F = rehabilitation unit
   G = home-health unit
    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
                                         Strategic Advantage

                           Uniqueness Perceived
                           By the Customer            Low Cost Position



             Marketwide                                   Overall Cost
              (broad)          Differentiation
                                                          Leadership
Strategic
Target
              Particular
            Segment Only    Differentiation/Focus          Cost/Focus
              (narrow)
Exhibit 7 – 1: TOWS Matrix
                              List Internal Strengths       List Internal Weaknesses
                              (competitive advantages)      (competitive disadvantages
                              1.                            1.
                              2.                            2.
                              3.                            3.
                              4.                            4.
List External Opportunities              4                            2
1.                                 Future Quadrant         Internal Fix-it Quadrant
2.
3.                            •Related diversification     •Retrenchment
                              •Vertical integration        •Enhancement
4.                            •Market development          •Market development
                              •Product development         •Product development
                              •Penetration                 •Vertical integration
                                                           •Related diversification
List External Threats                    3                           1
1.                            External Fix-it Quadrant        Survival Quadrant
2.
3.                            •Related diversification     •Unrelated diversification
4.                            •Unrelated diversification   •Divestiture
                              •Market development          •Liquidation
                              •Product development         •Harvesting
                              •Enhancement                 •Retrenchment
                              •Status quo
  Product Life Cycle

(sales and profit)
     Volume




                     Introduction   Takeoff    Maturation   Obsolescence
                                              Stages
                                                               Check p. 273
       Product Life Cycle/Strategic choices
(sales and profit)




                                                                  Market development
                                                                  Product development
     Volume




                                                                  Penetration
                                      Market development          Enhancement
                      Market          Product development         Status quo
                      development     Penetration                                            Divestiture
                                                                  Retrenchment
                      Product         Vertical integration                                   Liquidation
                      development                                 Divestiture
                                      Related diversification                                Harvesting
                                                                  Unrelated
                                                                  diversification            Unrelated
                                                                                             diversification

                     Introduction   Takeoff                  Maturation             Obsolescence
                                                         Stages
                                                                                        Check p. 273
  Exhibit 7 – 9: Strategic Position and Action Evaluation (SPACE)
  Matrix p. 284
                            Financial Strength

                                     6 ----
        Conservative
                                     5 ----                 Aggressive
                                     4 ----
                                     3 ----
                                     2 ----
                                     1 ----
Competitive
                                                                     Service Category
Advantage
                                                                     Strength
                -6 -5 -4 -3 -2 -1   -1 ----   1 2 3 4 5 6
                                    -2 ----
                                    -3 ----
                                    -4 ----
          Defensive                 -5 ----                 Competitive
                                    -6 ----


                        Environmental Stability
  Strategic Alternatives for (SPACE) Quadrants                   p. 289

                             Financial Strength

   Conservative                       6 ----            Aggressive
   •Status quo                        5 ----            •Related Diversification
   •Unrelated Diversification         4 ----            •Market Development
   •Harvesting                        3 ----            •Product Development
                                      2 ----            •Vertical Integration
                                      1 ----
Competitive
                                                                      Service Category
Advantage
                                                                      Strength
                 -6 -5 -4 -3 -2 -1   -1 ----   1 2 3 4 5 6
                                     -2 ----            Competitive
          Defensive                  -3 ----
          •Divestiture                                  •Penetration
                                     -4 ----            •Enhancement
          •Liquidation               -5 ----
          •Retrenchment                                 •Product Development
                                     -6 ----            •Market Development
                                                        •Status quo
                         Environmental Stability
Exhibit 8 – 1: The Value Chain
    Pre-Service                 Point-of-Service            After-Service
    Market/Marketing Research   Clinical Operations         Follow-up
    Target Market                Quality                     Clinical
    Services Offered/Branding    Process Innovation          Marketing
    Pricing                     Marketing                   Follow-on
    Promotion                    Patient Satisfaction        Clinical
    Distribution/Logistics       Product Development         Marketing
                                 Market Development
                                 Penetration
                                 Enhancement
                                 Differentiation

                               Organizational Culture
                 Shared Assumptions Shared Values Behavioral Norms


                                 Organizational Structure
                                Function Division Matrix

                                  Strategic Resource
                      Financial Human Information Technology


                                        Source: Adapted from Michael Porter
Exhibit 8 – 2: Decision Logic for the Value Adding Strategies

     Ends                        Means
•Directional Strategies       Value Adding
•Adaptive Strategies           Strategies
•Market Entry Strategies
•Competitive Strategies     Service Delivery
                            Strategies
                            •Pre-service
                            •Point-of-Service           Ends
                            •After-Service


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


                            Unit Action Plans
                            •Objectives
                            •Actions                            Means
                            •Timelines
                            •Responsibilities
Exhibit 8 – 8: Conceptual Model of Service Quality
  CONSUMER
     Word-of-Mouth
                                          Personal Needs     Past Experience
     Communications


                                         Expected Service

                                 Gap 5
                                         Perceived Service


MARKETER
                                          Service Delivery
                                          (including pre-
                                         and postcontacts)
                                                                 External
                                 Gap 3                       Communications
                                                              to Consumers
                                          Translation of
    Gap 1                                Perceptions into
                                         Service Quality
                                          Specifications

                                 Gap 4

                                          Management
                                          Perceptions of
                                            Consumer
                                           Expectations
Exhibit 9 – 1: Consistency in Value Adding Support Strategies

                             Organizational
                                Culture




            Organizational                      Strategic
              Structure                        Resources


                        Strategic Leadership
  Exhibit 9-2: Strategic Thinking Map for Developing Value Adding Support
  Strategies

                            Characteristics/Attributes        Evaluation


Value Adding Support       Results of          Requirements   Comparison of
Strategies                 Internal Analysis   of Selected    Strategy Requirements   Maintain   Change
                                               Strategies     and Internal Analysis


Organizational Culture

Organizational Structure

Strategic Resources
Organizational Culture
• Shared assumptions

• Shared values
                         Learned
• Behavioral norms

                         Shared


                         Subjective and
                         Objective
 Perspective 9 – 2
                                             Strategy                            Leadership Attributes
Culture
Control - focused on certainty,              •Status quo                         •Authoritative
predictability, safety, accuracy, and        •Enhancement                        •Directive
dependability. Value is to preserve,         •Market-share expansion             •Conservative
grow, and ensure the well-being and          •Market development                 •Cautious
success of the organization.       This      •Defender posture                   •Definitive
culture is centered on organizational        •Cost/Leadership                    •Commanding
goal attainment                                                                  •Firm

Collaboration – focused on synergy,          •Enhancement – high customization   •Team builder
unity, close connections with the            •Enhancement –customer              •First among equals
customer, and intense dedication to          relationships                       •Coach
the culture is centered on unique            •Vertical integration               •Participative
customer goal attainment.                    •Penetration                        •Integrator
                                             •Differentiation                    •Trust builder
                                             •Alliances
                                             •Analyzer posture


Competence – focused on distinction,         •Product development                •Standard setter
ensuring the accomplishment of               •Differentiation                    •Visionary
unparalleled, unmatched products and         •Prospector posture                 •Assertive, convincing persuader
services. This culture is centered on        •Market niche                       •Challenger of others
conceptual goal attainment.                  •Enhancement – innovation,
                                             quality

Cultivation – focused on enrichment,         •Analyzer posture                   •Catalyst
                                                                                 •Cultivator
ensures the fullest growth of the            •Differentiation - focus
                                                                                 •Harvester
customers, fulfillment of the customer’s     •Enhancement – innovation,
                                                                                 •Commitment builder
potential, the raising up of the customer.   customization
                                                                                 •Steward
This culture is focused on value-centered
                                                                                 •Appeal to high-level vision
goal attainment.
                  Structure
• Functional Structure

• Divisional Structure (SBU)

• Matrix
    Exhibit 9 – 3: Functional Structure Combined with Process Structure


                                                                 CEO



Functional                           Human              Clinical            Finance &               Information         Maintenance;
Structure       Marketing
                                    Resources          Operations           Accounting                systems           Housekeeping




Functional                                                                                                        Clinical
Structure                   Medicine            Surgery             Obstetrics              Pediatrics
                                                                                                                  Services




Process            Pre-Op            Anesthesia              Surgical             Post-op
Structure        Preparation        Prep & Adm.             Procedure            Recovery




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

                                                                                             Corporate Services
                                                                                             •Legal
                                                                                             •Planning
                                                                                             •Marketing
                                                                                             •Administrative Services




Product                                                                               Affiliated         Medical          Professional
Structure        Insurance           Foundation               Hospitals
                                                                                      Services         Management           Services




Geographic                   Western              Southern                 Eastern
Structure                    Division              Division                Division




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



                                          Human                                     Finance &          Information       Maintenance;
CLINICAL             Marketing                                  Legal
                                         Resources                                  Accounting           systems         Housekeeping


Medicine


 Surgery


Obstetrics


Pediatrics

Clinical
Services



             Matrix Structure Strategic Advantages                            Matrix Structure Strategic Disadvantages
             •Develops functional expertise                                   •Causes difficulties in management
             •Allows for a variety of product/project developments            •Violates the unity of command principle
             •Allows for the efficient use of functional expertise            •Creates coordination and communications problems
             •Encourages rapid product development                            •Requires negotiation and shared responsibility
             •Fosters creativity and innovation                               •Allows for confusion on priorities
         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
• “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

                    Strategy
                    •Directional strategies
                    •Adaptive strategies
                    •Market entry strategies
                    •Competitive strategies


Service Delivery
Strategies                                     Support Strategies
                            Strategic          •Culture
•Pre-service
                           Leadership          •Structure
•Point-of-service
•After-service                                 •Strategic Resources


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



Set Objectives                   Compare     Determine
                   Measure                                 Take
     Or                         Objectives    Reasons
                    Actual                               Corrective
  Redefine                         With         For
                 Performance                              Action
  Objectives                   Performance   Deviation
    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
               Concept Control                           Strategic Control
                                                   Establish or confirm performance
               Set objectives or                      Standards – Mission, Vision
              redefine objectives                          Values, and Goals

                                                        Measure organizational
             Measure performance
                                                            performance

             Compare performance                         Compare performance
                with objectives                             with standards

              Determine reasons                   Are strategic assumptions still valid?
                for deviations                              External factors
                                                             Internal factors

                                                   Are the Directional Strategies
                                                           still appropriate?

                                                    Are the Adaptive Strategies
                                                           still appropriate?

                                                  Are the Market Entry Strategies
                                                          still appropriate?

                                                  Are the Competitive Strategies
                                                          still appropriate?

                                                 Are the Implementation Strategies
                                                           still appropriate?

             Take Corrective Action                    Take Corrective Action

				
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