Service Area Competitor AnalysisHCAD 5390

Market FundamentalsDetermine the appropriate market and define it as precisely as possibleFew organizations can serve the entire market, so Think in terms of segments of the marketWatch for new segments emerging and existing segments disappearing constantlyDefine segments and concentrate on a select few

Bases for Segmentation: Patients and ConsumersPatient demographicsPatient economicsPatient lifestylePatient sociocultural factorsPatient geographic locationPatient purchase/usage behavior

Bases for Segmentation: Organizations as CustomersOrganization physical locationOrganization economicsOrganization purchase behaviorOrganization infrastructureOrganization use of product or service

Segment Characteristics Bases for Selection and Strategic TargetingTotal Competitor Sales from the SegmentAverage Competitor Profits Earned in the SegmentSegment Value Chain Activities and Related CostsSegment Distribution ChannelsCompetitive Intensity

Criteria for Selecting Suitable Market SegmentsDefinable in objective termsCan distribute products/services to segmentMedia channels for marketing to segmentCustomers interested in buying firms products/servicesCustomers have money to buy firms products/servicesCan sell products/services at prices that allow above-average profitsNo conflict between new and existing customersRoom in segment for another competitor

Customer FundamentalsMarket is composed of individual customersMust identify and describe them in detailFirst determine who the real customers areLearn what they value in the products/services the firm offersPlan strategies to satisfy customer needs in one or more targeted segments

Customer Roles in Purchasing Health Care ServicesActual recipient of the servicesOne who decides that patient will receive the servicesOther influencers of decision to seek and receive the servicesOne who decides who will provide the servicesActual provider of the servicesCovers and pays for the servicesPays premiums for health insurance coverage

Sources of Customer ValuePerformance of the product or serviceAppearance of the product or serviceQuality of the product or serviceSetting in which it is purchased or consumedReputation of the seller of the product or serviceReputation of the product/service brand nameDemeanor of people selling the product/serviceService available before/during/after the purchase

Which Product or Service Attributes to EmphasizeWithin segments, customers will have different value preferencesIdentify and target attributes most widely preferredStart with threshold attributes (bare minimum, taken for granted, not pay extra for)Critical success factors (prefer one competitor over another and pay a premium)Match resources/competencies to these factors gain a competitive advantage

Learning Customer Value PreferencesCurrent customers prefer values in existing products or services listen to what they sayGeneral public opinion surveys Patient satisfaction surveysCustomer complaintsOrganization-sponsored market researchPatient or customer focus groups

Using Market/Customer Data in Strategic Decision-Making Identify threshold product featuresIdentify critical success factor (CSF) featuresHow well do competitors deliver those features?Compare resources and competencies to critical success factors Sustainable competitive advantage possible?

Mobilize resources/competencies to deliver CSFsDevelop/acquire new resources/competenciesTarget different market segments

Industry vs. MarketIndustry:Group of organizations (usually for-profit)Selling similar products and services to Similar markets and customersMarket:Group of customers (people or businesses)Demand similar products and services to Satisfy similar needsMarket is composed of customers who buy products and services from organizations in an industry

Understanding an IndustryIndustry Value ChainDescribes the structure of an industry.

Porters Five Forces ModelDescribes the forces that determine the profit potential of an industry.

Industry Value ChainDescribes the structure of an industry:Chain of sequential activities and organizationsEach adding value until finished good emergesMost firms operate in part of the value chainEach firm adds different amounts of valueEach firm captures different amounts of profitProfit captured depends on bargaining power

Industry Value Chain for Artery Stent ImplantationEmployerManaged Care OrganizationHealth PlanIntegrated Delivery SystemIndividual Practice AssociationCardiology Group PracticeStent-Insertion SpecialistPatient/Employee/Health Plan Member

Porters Five Forces ModelDescribes the forces that determine the profit potential of an industry:Competitive intensityThreat of entry by competitors from outside the industryAvailability of equivalent, substitute productsBargaining power of buyers and customersBargaining power of suppliers and employees

Industry EnvironmentA set of factors that directly influences a company and its competitive actions and responsesInteraction among these factors determine an industrys profit potentialThreat of new entrantsPower of suppliersPower of buyersProduct substitutesIntensity of rivalry

Analyzing Industry EnvironmentOpportunities and threats are competitive challenges arising for changes in industry conditions.Analytic tools such as the five forces model help managers formulate appropriate strategic responses.

Five Forces Model of CompetitionIdentify current and potential competitors and determine which firms serve themConduct competitive analysisRecognize that suppliers and buyers can become competitorsRecognize that producers of potential substitutes may become competitors

Industry Force 1: Competitive IntensityFactors encouraging intensity of competition:Large number of competitorsSlow industry growthHigh fixed costs Lack of differentiationHigh strategic stakesHigh exit barriersHigh competitor diversity

Industry Force 2: Entry By Outside CompetitorsBarriers to entry by new, outside competitors:Economies of scaleProduct differentiationCapital requirementsSwitching costsAccess to distribution channelsOther cost disadvantagesGovernment policy

Industry Force 3: Equivalent, Substitute ProductsAvailability of equivalent, substitute products that:Perform the same function, or Customers believe perform same functionOffer more performance for same priceOffer same performance at lower price

Compare alternative, Eastern medicine with conventional, Western medicine.

Industry Force 4: Bargaining Power of Buyers or CustomersBuyers or customers have greater bargaining power when:Customers purchases represent large share of sellers sales.Customers purchases from firm represent a large share of customers costs.Items purchased are homogenous with few differentiating features.Costs of switching from one vendor to another are low.Buyers profit margins are low.Buyer has plausible opportunities to integrate backward into the sellers business.Buyer has good knowledge of sellers operating costs and deals with other buyers.

Industry Force 5: Bargaining Power of Suppliers or EmployeesConcentrated supplier industryNo substitutes for suppliers productsBuyer is not important customer of supplierSuppliers product is important input to buyers businessSuppliers products are differentiatedSuppliers products have high switching costsSupplier can plausibly integrate forward

A Sixth Force?Government PolicyMay constitute barrier to entryEspecially prominent in health care and biotechGovernment entities play many health care roles:Payers/customers (Medicare, Medicaid)Providers (VA, IHS, city hospitals)Funders (NIH)Regulators (HIPAA, ERISA, Stark, fraud and abuse, antitrust, FDA)

Understanding CompetitorsWhich competitors to analyze?Competitors in systems and networksNarrowing the scope of competitor analysisIndividual competitor analysisStrategic aspirations and commitmentsStrategic capabilitiesForecasting competitor strategic behavior

Which Competitors to Analyze?Existing, immediate competitorsPotential new competitorsIndirect competitors

Potential New CompetitorsExpanding out of other geographic marketsExpanding similar, related product linesCustomers integrating backwardSuppliers integrating forwardWeak firm acquired by stronger firmInvaded firms retaliate by invading backGood fit with industry critical success factors

Competition With and Among Networks and SystemsNetworks and systems are a major force in the health care industryIntegrated delivery systems, hospital networks, health plan networks, nursing home chainsCompeting with a single organization or a large aggregation of organizations?Different resources and competenciesDifferent strategic aspirations and intentions

Narrowing the Scope of Competitor AnalysisInsufficient resources to tackle all competitorsFocus on subsets of competitorsConcentrate on the greatest strategic threatsOrganize the industry into strategic groups

Strategic Groups in the Pharmaceutical Industry

Strategic Groups in the Pharmaceutical Industry

Strategic Groups in the Pharmaceutical Industry

Strategic Group AnalysisCluster of businesses with similar characteristics, resources/competencies, and strategiesReact to industry development in similar ways Industry counterpart to market segmentsStrategic groups of physician practices, hospitals, health plans, drug companies, or Defining characteristics of strategic groups of physician practices

Defining Strategic Groups:Physician Prac