HAS 6400 Session 4 Dr. Burton. “The understanding that underlies the right decision grows out of the clash and conflict of divergent opinions and out.

HAS 6400

Session 4

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

Developing Strategic Alternatives

Evaluating Strategic Alternatives

Strategic Choice

Decision Logic of Strategy Formulation

Directional Strategies

Adaptive Strategies

Market EntryStrategies

CompetitiveStrategies

ImplementationStrategies

Ends Means

Ends Means

Ends Means

Ends Means

StrategyImplementationStrategy Formulation

Exhibit 6-4: Strategic Thinking Map-Hierarchy of Strategic Decisions and Alternatives

Directional Strategies

Adaptive Strategies

Market EntryStrategies

CompetitiveStrategies

ImplementationStrategies

•Mission

•Vision

•Values

•Goals

Expansion of Scope•Diversification•Vertical Integration•Market Development•Product Development•Penetration

Contraction of Scope•Divestiture•Liquidation•Harvesting•Retrenchment

Maintenance Scope•Enhancement•Status Quo

Purchase•Acquisition•Licensing•Venture Capital Investment

Cooperation•Merger•Alliance•Joint Venture

Development•Internal Development•Internal Venture

Strategic Posture•Defender•Prospector•Analyzer

PositioningMarketwide•Cost leadership•Differentiation

Market segment•Focus/ Cost leadership•Focus/ Differentiation

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

Support•Culture•Structure•Strategic Resources

Unit Action Plans•Objectives•Actions•Timelines•Responsibilities

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

Related Diversification

HospitalHospitalRadiationTreatment

RadiationTreatment

DiagnosticLab

DiagnosticLab

HospiceHospice

PhysicianGroup

PhysicianGroup

AmbulatoryCare

AmbulatoryCare

Long-termCare

Long-termCare

HomeHealth

HomeHealth

Unrelated Diversification

Health Care Environment•Pharmaceuticals•Medical Supplies•Insurance•Managed Care•Medical Schools•Others

Health Care Environment•Pharmaceuticals•Medical Supplies•Insurance•Managed Care•Medical Schools•Others

General environment•Restaurants•Health and fitness•Parking lots•Shopping Centers•Office Building•Laundry

General environment•Restaurants•Health and fitness•Parking lots•Shopping Centers•Office Building•Laundry

Outside the HealthCare Industry

Within the HealthCare Industry

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

StrategicBusiness Unit

Upstream Downstream

A

B = primary care unit

B C D E F G

C = urgent care unit

D = hospital (inpatient acute care) unit

E = skilled-nursing unit

F = rehabilitation unit

G = home-health unit

A = Wellness/health promotion unit

1

2

3

4

5

Solid lines depict fullyInternal transfers

Dashed lines depict marketAnd external transfers

Total integration

No integration

Vertically integratedUpstream

Multi-hospitalVertically integrated

Closed System

Perspective 6 – 4: Focused Factory Tools for Providers of Health Care Services p. 241 Swayne

• 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 StrategiesExhibit 6 – 15: Porter’s Matrix

DifferentiationDifferentiation Overall Cost Leadership

Overall Cost Leadership

Differentiation/FocusDifferentiation/Focus Cost/FocusCost/Focus

Strategic Advantage

StrategicTarget

Uniqueness PerceivedBy the Customer Low Cost Position

Marketwide(broad)

ParticularSegment Only

(narrow)

Exhibit 7 – 1: TOWS Matrix

4 Future Quadrant

•Related diversification•Vertical integration•Market development•Product development•Penetration

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

2 Internal Fix-it Quadrant

•Retrenchment•Enhancement•Market development•Product development•Vertical integration•Related diversification

3 External Fix-it Quadrant

•Related diversification•Unrelated diversification•Market development•Product development•Enhancement•Status quo

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

1 Survival Quadrant

•Unrelated diversification•Divestiture•Liquidation•Harvesting•Retrenchment

List Internal Strengths(competitive advantages)1.2.3.4.

List Internal Weaknesses(competitive disadvantages1.2.3.4.

List External Opportunities1.2.3.4.

List External Threats1.2.3.4.

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ales

an

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Introduction Takeoff Maturation Obsolescence

Stages

Product Life Cycle

Check p. 289

Vo

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Introduction Takeoff Maturation Obsolescence

Stages

Product Life Cycle/Strategic choices

Check p. 289

Market development

Product development

Market development

Product development

Penetration

Vertical integration

Related diversification

Market development

Product development

Penetration

Enhancement

Status quo

Retrenchment

Divestiture

Unrelated diversification

Divestiture

Liquidation

Harvesting

Unrelated diversification

Exhibit 7 – 6 BCG Portfolio Analysis

MarketGrowth

Rate

Relative Market Share Position

High

High

Medium

Low

Medium Low

StarsProblemChildren

CashCows

Dogs

BlackHole

BlackHole

ProblemChild

ProblemChild

CashPig

CashPig

MangyDog

MangyDog

Exhibit 7 – 8: Expanded Product Portfolio Matrix

Growth

Market Share

High

High

Low

Low

StarsStars HealthyChild

HealthyChild

CashCow

CashCow

FaithfulDog

FaithfulDog Growth

Market Share

High

High

High

LowProfit

Low

Low

Exhibit 7 – 9: Strategic Position and Action Evaluation (SPACE) Matrix p. 300

CompetitiveAdvantage

Financial Strength

Service CategoryStrength

Environmental Stability

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

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

Defensive Competitive

AggressiveConservative

Strategic Alternatives for (SPACE) Quadrants p. 300

CompetitiveAdvantage

Financial Strength

Service CategoryStrength

Environmental Stability

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

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

Defensive•Divestiture•Liquidation•Retrenchment

Competitive•Penetration•Enhancement•Product Development•Market Development•Status quo

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

Conservative•Status quo•Unrelated Diversification•Harvesting

Market Entry Strategies

• Acquisition• Licensing• Venture Capital Investment• Merger• Alliance• Joint Venture• Internal Development• Internal Venture

Market Entry Strategies and Organizational Goals

Rapid Market Entry

Slow Market Entry

HighDesire forControl

LowDesire forControl

LicensingLicensing

AcquisitionAcquisition

MergerMerger

Venture CapitalInvestment

Venture CapitalInvestment

AllianceAlliance

Joint VentureJoint Venture

InternalVenture

InternalVenture

InternalDevelopment

InternalDevelopment

Benchmarking

• Comparison– With peers

• Comparisons outside of own industry with similar processes

Exhibit 7 – 23: Map of Selected Strategies for LTC Org

Market EntryStrategies

AdaptiveStrategies

CompetitiveStrategies

Expansion of Scope Cooperation Strategic Posture

PositioningDevelopment

Maintenance of Scope

•Vertical Integration

•Product development

•Market development

•Penetration

•Alliance

•Joint Venture

•Internal Development

•Enhancement

•Analyzer

Marketwide Differentiation Quality Service Caring

Information system

Advertising

Independent Living facility

Hospital Alliance

Medicare

Management 21CChapter 14 “Communities of leaders or no

leadership at all”

• Core learning capabilities:– Individual and collective aspiration:

• Clarifying personal vision and values and building shared visions

– Reflective conversation:• Increasing personal reflectiveness (individual and

shared mental models) and developing capabilities for dialog and productive discussion within work teams.

– Understanding complexity:• Systems thinking

Leadership and the challenges to sustaining change.

• Change occurs at inner and outer levels• Growing new ways of working together• Growth processes are interaction of self-reinforcing

(positive) and balancing (negative) feedback.• Helping create energies that generate self-reinforcing

growth processes • Understanding and attending to limiting processes

(leverage and constraints)• Understanding the diversity of limiting processes and

revealing the variety of leadership strategies and leaders needed to sustain change.

Challenges of initiating

• Time: “We don’t have time for this stuff”

• Help: “We have no help” or “We’re wasting our time”

• Relevance: “This stuff isn’t relevant.”

• Walking the talk: “They’re not walking the talk.”

Challenges of sustaining

• Fear and anxiety: “This isn’t good.”

• Measurement: “This stuff is not working.”

• True believers and non-believers: “We have the way” vs. “they are acting like a cult.”

Challenges of redesigning and rethinking

• Governance: “They (the powers that be) never let us do this stuff…”

• Diffusion: “We keep reinventing the wheel..”

• Strategy and purpose: “What are we here for?”