Business w/healthcare DQ 475 words w 3 references apa

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STRATEGIC MANAGEMENT OF
HEALTH CARE ORGANIZATIONS 7TH EDITION

Developing Strategic Alternatives

Chapter 6

Understand and discuss the steps involved in the decision logic of strategy development.

Chapter 6 Learning Objectives

Understand and discuss the steps involved in the decision logic of strategy development.
Synthesize and integrate strategic thinking accomplished in situational analysis into a strategic plan for an organization.

Chapter 6 Learning Objectives

Understand and discuss the steps involved in the decision logic of strategy development.
Synthesize and integrate strategic thinking accomplished in situational analysis into a strategic plan for an organization.
Identify the hierarchy of strategies and strategic decisions required in strategic planning.

Chapter 6 Learning Objectives

Understand and discuss the steps involved in the decision logic of strategy development.

Synthesize and integrate strategic thinking accomplished in situational analysis into a strategic plan for an organization.

Identify the hierarchy of strategies and strategic decisions required in strategic planning.

Understand the nature of directional strategies, adaptive strategies, market entry strategies, and competitive strategies.

Chapter 6 Learning Objectives

Identify strategic alternatives available to health care organizations.

Chapter 6 Learning Objectives

Identify strategic alternatives available to health care organizations.
Provide the rationale as well as advantages and disadvantages for each of the strategic alternatives.

Chapter 6 Learning Objectives

Identify strategic alternatives available to health care organizations.

Provide the rationale as well as advantages and disadvantages for each of the strategic alternatives.

Understand that strategies may have to be used in combination to accomplish the organization’s goals.

Chapter 6 Learning Objectives

Identify strategic alternatives available to health care organizations.
Provide the rationale as well as advantages and disadvantages for each of the strategic alternatives.
Understand that strategies may have to be used in combination to accomplish the organization’s goals.
Map strategic decisions showing how they are linked as an ends–means chain.

Chapter 6 Learning Objectives

The Strategic Planning Process

Strategic Planning

Situation Analysis

Strategy Formulation

Planning the Implementation

External Analysis

Internal Analysis

Directional Strategies

Adaptive Strategies

Market Entry Strategies

Competitive Strategies

Service Delivery Strategies

Support Strategies

Action Plans

Strategy Formulation

Strategy formulation is the deciding what the organization should explicitly be doing

What the organization is NOW doing but should STOP doing?
What is the organization NOT doing but should START doing?
What the organization is currently doing that should be DONE

DIFFERENTLY?

Linking Today and Tomorrow

Profile of Today

Vision (hope

for the future)

Profile of

Tomorrow

Strategy

year

plans

budgets

plans

budgets

Linking Strategic Alternatives

Check List	Strategy 1	Strategy 2	Strategy 3
Addresses an External Issue?
Draws on a Competitive Advantage or Fixes a Competitive Disadvantage?
Fits with Mission, Values?
Moves the Organization Toward the Vision?
Achieves One or More Strategic Goals?

Decision Logic of Strategy Formulation

Directional

Strategies

Adaptive

Strategies

Market Entry

Strategies

Competitive

Strategies

Implementation

Strategies

Strategy

Formulation

Strategy

Implementation

Decision Logic of Strategy Formulation

Directional

Strategies

Adaptive

Strategies

Market Entry

Strategies

Competitive

Strategies

Implementation

Strategies

Ends Means Ends Means

Strategy

Formulation

Strategy

Implementation

Strategy Formulation

Directional Strategies

The broadest strategies that set the fundamental direction of the organization by establishing a mission for the organization (Who are we?) and vision for the future (What should we be?). In addition, directional strategies specify the organization’s values and the strategic goals.

Strategy Formulation

Directional Strategies	The broadest strategies that set the fundamental direction of the organization by establishing a mission for the organization (Who are we?) and vision for the future (What should we be?). In addition, directional strategies specify the organization’s values and the strategic goals.
Adaptive Strategies	These strategies are more specific than directional strategies and provide the primary methods for achieving the vision (adapting to the environment). These strategies determine the scope of the organization and specify how the organization will expand scope, reduce scope, or maintain scope.

Strategy Formulation

Market Entry Strategies

These strategies provide the method of carrying out the adaptive strategies (expansion of scope and the maintenance of scope strategies) through purchase, cooperation, or internal development. Market entry strategies are not used for reduction of scope strategies.

Strategy Formulation

Market Entry Strategies	These strategies provide the method of carrying out the adaptive strategies (expansion of scope and the maintenance of scope strategies) through purchase, cooperation, or internal development. Market entry strategies are not used for reduction of scope strategies.
Competitive Strategies	Two types of strategies, one that determines an organization’s strategic posture and one that positions the organization vis-à-vis other organizations within the market. These strategies are market oriented and best articulate competitive advantage.

Planning the Implementation

Implementation Strategies

These strategies are the most specific strategies and are directed toward value added service delivery and the value added support areas. In addition, individual organizational units develop objectives and action plans that carry out the value added service delivery and value added support strategies.

Strategic Thinking Map
Hierarchy of Strategic Decisions and Alternatives

Directional Strategies

Mission

Vision

Values

Goals

Implementation Strategies

Service Delivery

Pre-service
Point-of-service
After-service

Support

Culture
Structure
Strategic resources

Unit Action Plans

Objectives
Actions
Timelines
Responsibilities

Competitive Strategies

Strategic Posture

Defender
Prospector
Analyzer
(Reactor)

Positioning

Market-wide

Cost leadership
Differentiation

Market Segment

Focus/Cost

leadership

Focus/

differentiation

Market Entry Strategies

Purchase

Acquisition
Licensing
Venture capital

investment

Cooperation

Merger
Alliance
Joint venture

Development

Internal

development

Internal

venture

Adaptive Strategies

Expansion of Scope

Diversification
Vertical Integration
Market Development
Product Development
Penetration

Contraction of Scope

Divestiture
Liquidation
Harvesting
Retrenchment

Maintenance of Scope

Enhancement
Status Quo

Normative Model of
Strategy Formulation

Strategy Formulation Example Decisions

Directional Strategies

Organizational Scope

Strategies

Marketing Entry

Strategies

Competitive Strategies

Implementation Strategies

Strategy

Content

Mission, Vision, Values

Diversification, Vertical

Integration

Acquisition, Alliance,

Merger

Cost Leadership, Defender

Marketing, Structure

Strategic Thinking Map
Hierarchy of Strategic Decisions and Alternatives

Directional Strategies

Mission

Vision

Values

Goals

Adaptive Strategies

Expansion of Scope

Diversification
Vertical Integration
Market Development
Product Development
Penetration

Contraction of Scope

Divestiture
Liquidation
Harvesting
Retrenchment

Maintenance of Scope

Enhancement
Status Quo

Adaptive Strategic Alternatives – Expansion

Expansion of Scope Types

Diversification

Vertical Integration

Market Development

Product Development

Penetration

Unrelated

Forward

Backward

Geographic

Segment

Product Line

Product Enhancements

Promotion

Distribution

Pricing

Adaptive Strategies – Expansion

Strategy	Definition	Rationale
Related Diversification	Adding new related product or service categories. Often requires the establishment of a new division	Pursuit of high-growth markets Entering less-regulated segments Cannot achieve current objectives Synergy is possible from new business Offset seasonal or cyclical influences

Adaptive Strategies – Expansion

Strategy	Definition	Rationale
Related Diversification	Adding new related product or service categories. Often requires the establishment of a new division	Pursuit of high-growth markets Entering less-regulated segments Cannot achieve current objectives Synergy is possible from new business Offset seasonal or cyclical influences
Unrelated Diversification	Adding new unrelated product or service categories. Typically requires the establishment of a new division	Pursuit of high-growth markets Entering less-regulated segments Cannot achieve current objectives Current markets are saturated or in decline Organization has excess cash Antitrust regulations prohibit expansion in current industry Tax loss may be acquired

Adaptive Strategies – Expansion

Strategy	Definition	Rationale
Backward Vertical Integration	Adding new members along the distribution channel (toward a later stage) for present products and services or controlling the flow of patients from one institution to another	Control the flow of patients through the system Scarcity of raw materials or essential inventory/supplies Deliveries are unreliable Lack of materials or supplies will shut down operations Price or quality of materials or supplies variable Industry/market seen as profitable for long term

Adaptive Strategies – Expansion

Strategy	Definition	Rationale
Backward Vertical Integration	Adding new members along the distribution channel (toward a later stage) for present products and services or controlling the flow of patients from one institution to another	Control the flow of patients through the system Scarcity of raw materials or essential inventory/supplies Deliveries are unreliable Lack of materials or supplies will shut down operations Price or quality of materials or supplies variable Industry/market seen as profitable for long term
Forward Vertical Integration	Adding new members along the distribution channel (toward an earlier stage) for present products and services or controlling the flow of patients from one institution to another	Control the flow of patients through the system Faster delivery required High level of coordination required between one stage and another – secure needed resources Industry/market seen as profitable for long term Gain bargaining power

Hospital Vertical Integration

Hospital

Strategic

Business Unit

Upstream Downstream

Urgent Care

Unit

Primary Care

Unit

Wellness/

Health Promotion

Unit

Skilled

Nursing

Unit

Rehabilitation

Unit

Home Health

Unit

Adaptive Strategies – Expansion

Strategy	Definition	Rationale
Market Development	Introducing present products or services into new geographic markets or to new segments within a present geographic market	New markets are available for present products Provide comprehensive services across the market (focus factory) New markets may be served efficiently Expected high revenues Organization has cost leadership advantage Organization has differentiation advantage Current market is growing

Fundamental Expansion Strategies

Products

Old New

Markets

Old

New

Market

Development

Adaptive Strategies – Expansion

Strategy	Definition	Rationale
Market Development	Introducing present products or services into new geographic markets or to new segments within a present geographic market	New markets are available for present products Provide comprehensive services across the market (focus factory) New markets may be served efficiently Expected high revenues Organization has cost leadership advantage Organization has differentiation advantage Current market is growing
Product Development	Improving present products or services or extending the present product line	Currently in strong market but product is weak or product line incomplete Market tastes are changing Product technology is changing Maintenance or creation of differentiation advantage

Fundamental Expansion Strategies

Products

Old New

Markets

Old

New

Market

Development

Product

Development

Key Strategic Thinking Questions

Remember to draw upon the results of external analysis, internal analysis, and development of directional strategies

Questions	Products/Services Strategies	Internal Processes
Stop doing?
Start doing?
Continue doing?
Do differently?

Services versus Customers

CONTRACT/

EXPAND

Two-Phase Refocus

CONTRACT/

EXPAND

Two-Phase Refocus

CONTRACT

MAINTAIN

CONTRACT

Change Focus

CONTRACT

Getting Out

Change Focus

Reduce Costs

Improve Efficiency

Improve Quality

EXPAND

New Markets Refocus

New Services

& Markets

EXPAND

Reduce Types

or Number of

Customers

Keep Types or

Number of

Customers Same

Add New

Customers

Reduce

Programs or

Services

Keep

Programs or

Services

the Same

Add New

Programs or

Services

Adaptive Strategies – Expansion

Strategy	Definition	Rationale
Penetration	Seeking to increase market share for present products or services in present markets through marketing efforts (promotion, channels, or price)	Present market is growing Product/service innovation will extend product life cycle (PLC) Expected revenues are high Organization has cost leadership advantage Organization has differentiation advantage

Fundamental Expansion Strategies

Products

Old New

Markets

Old

New

Penetration

Strategies

Market

Development

Product

Development

Fundamental Expansion Strategies

Products

Old New

Markets

Old

New

Penetration

Strategies

Market

Development

Product

Development

Diversification

Adaptive Strategic Alternatives – Contraction

Contraction of Scope Types

Divestiture

Liquidation

Harvesting

Retrenchment

Total

Partial

Operations

Assets

Fast

Slow

Markets

Products

Adaptive Strategies – Contraction

Strategy	Definition	Rationale
Divestiture	Selling an operating unit or division to another organization. Typically, the unit will continue in operation	Industry in long-term decline Cash needed to enter new, higher growth area Lack of expected synergy with core operation Required investment in new technology seen as too high Too much regulation Unbundling

Adaptive Strategies – Contraction

Strategy	Definition	Rationale
Divestiture	Selling an operating unit or division to another organization. Typically, the unit will continue in operation	Industry in long-term decline Cash needed to enter new, higher growth area Lack of expected synergy with core operation Required investment in new technology seen as too high Too much regulation Unbundling
Liquidation	Selling all or part of the organization’s assets (facilities, inventory, equipment, and so on) in order to obtain cash. The purchaser may use the assets in a variety of ways and businesses	Organization can no longer operate Bankruptcy Trim/reduce assets Superseded by new technology

Adaptive Strategies – Contraction

Strategy	Definition	Rationale
Harvesting	Products or services typically in late stages of the product life cycle (late maturity and decline) where industry-wide revenues are expected to decline. These products or services will ultimately be discontinued but may generate revenue for some time. Few new resources are allocated to these areas	Late maturity/decline of the product life cycle Consider divestiture or downsizing Short-term cash needed

Adaptive Strategies – Contraction

Strategy	Definition	Rationale
Harvesting	Products or services typically in late stages of the product life cycle (late maturity and decline) where industry-wide revenues are expected to decline. These products or services will ultimately be discontinued but may generate revenue for some time. Few new resources are allocated to these areas	Late maturity/decline of the product life cycle Consider divestiture or downsizing Short-term cash needed
Retrenchment	Reducing the scope of operations, redefining the target market, cutting geographic coverage, reducing the segments served, or reducing the product line	Market has become too diverse Market is too geographically spread out Personnel costs are too high Too many products or services Marginal or nonproductive facilities

Adaptive Strategic Alternatives – Maintenance

Maintenance of Scope

Enhancement

Status Quo

Quality

Efficiency

Innovation

Speed

Flexibility

Adaptive Strategies – Maintenance

Strategy	Definition	Rationale
Enhancement	Seeking to improve operations within present product or service categories through quality programs, increasing flexibility, increasing efficiency, speed of delivery, and so on	Organization has operational inefficiencies Need to lower costs Need to improve quality Improve internal processes

Adaptive Strategies - Maintenance

Strategy	Definition	Rationale
Enhancement	Seeking to improve operations within present product or service categories through quality programs, increasing flexibility, increasing efficiency, speed of delivery, and so on	Organization has operational inefficiencies Need to lower costs Need to improve quality Improve internal processes
Status quo	Seeking to maintain relative market share within a market	Maintain market share position Maturity/late maturity stage of the product life cycle Product/market generating cash but has little potential for future growth Extremely competitive market

Strategic Thinking Map
Hierarchy of Strategic Decisions and Alternatives

Directional Strategies

Mission

Vision

Values

Goals

Market Entry Strategies

Purchase

Acquisition
Licensing
Venture capital

investment

Cooperation

Merger
Alliance
Joint venture

Development

Internal

development

Internal

venture

Adaptive Strategies

Expansion of Scope

Diversification
Vertical Integration
Market Development
Product Development
Penetration

Contraction of Scope

Divestiture
Liquidation
Harvesting
Retrenchment

Maintenance of Scope

Enhancement
Status Quo

Market Entry Strategies – Purchase

Directional Strategies

Mission

Vision

Values

Goals

Market Entry Strategies

Purchase

Acquisition
Licensing
Venture capital

investment

Cooperation

Merger
Alliance
Joint venture

Development

Internal

development

Internal

venture

Adaptive Strategies

Expansion of Scope

Diversification
Vertical Integration
Market Development
Product Development
Penetration

Contraction of Scope

Divestiture
Liquidation
Harvesting
Retrenchment

Maintenance of Scope

Enhancement
Status Quo

Market Entry Strategies – Purchase

Market Entry Strategy	Definition	Major Advantages	Major Disadvantages
Acquisition	Strategy to grow through the purchase of an existing organization, unit of an organization, or a product/service	Rapid market entry Image already established Performance known before purchase	New business may be unfamiliar to parent Takes a long time to assimilate organization’s culture New management team may be required High initial cost

Market Entry Strategies – Purchase

Market Entry Strategy	Definition	Major Advantages	Major Disadvantages
Acquisition	Strategy to grow through the purchase of an existing organization, unit of an organization, or a product/service	Rapid market entry Image already established Performance known before purchase	New business may be unfamiliar to parent Takes a long time to assimilate organization’s culture New management team may be required High initial cost
Licensing	Acquiring or providing an asset (technology, market, equipment, etc.) through contract	Rapid access to proven technology Reduced financial exposure Access to brand name Exclusive territory	Not a substitute for internal technical competence Not proprietary technology Dependent on licensor Rules and regulations

Market Entry Strategies – Purchase

Market Entry Strategy	Definition	Major Advantages	Major Disadvantages
Acquisition	Strategy to grow through the purchase of an existing organization, unit of an organization, or a product/service	Rapid market entry Image already established Performance known before purchase	New business may be unfamiliar to parent Takes a long time to assimilate organization’s culture New management team may be required High initial cost
Licensing	Acquiring or providing an asset (technology, market, equipment, etc.) through contract	Rapid access to proven technology Reduced financial exposure Access to brand name Exclusive territory	Not a substitute for internal technical competence Not proprietary technology Dependent on licensor Rules and regulations
Venture Capital Investment	Financial investment in an organization in order to participate in its growth or receipt of venture capital for startup or expansion	Can provide window on new technology or market Low risk	Alone, unlikely to be a major stimulus of growth Extended time to profitability

Market Entry Strategies – Cooperation

Directional Strategies

Mission

Vision

Values

Goals

Market Entry Strategies

Purchase

Acquisition
Licensing
Venture capital

investment

Cooperation

Merger
Alliance
Joint venture

Development

Internal

development

Internal

venture

Adaptive Strategies

Expansion of Scope

Diversification
Vertical Integration
Market Development
Product Development
Penetration

Contraction of Scope

Divestiture
Liquidation
Harvesting
Retrenchment

Maintenance of Scope

Enhancement
Status Quo

Market Entry Strategies – Cooperation

Market Entry Strategy	Definition	Major Advantages	Major Disadvantages
Merger	Combining two (or more) organizations through mutual agreement to form a single new organization	Uses existing resources Retains existing markets and products Reduces competition	Takes a long time to merge cultures Merger match often difficult to find

Market Entry Strategies – Cooperation

Market Entry Strategy	Definition	Major Advantages	Major Disadvantages
Merger	Combining two (or more) organizations through mutual agreement to form a single new organization	Uses existing resources Retains existing markets and products Reduces competition	Takes a long time to merge cultures Merger match often difficult to find
Alliance	Formation of a formal partnership	Fills in gaps in product line Creates efficiencies (e.g., bargaining power) Reduces competition in weak markets Stabilizes referral base Shared risk	Potential for conflict between members Limits potential markets/products Difficult to align resources Governance issues

Market Entry Strategies – Cooperation

Market Entry Strategy	Definition	Major Advantages	Major Disadvantages
Merger	Combining two (or more) organizations through mutual agreement to form a single new organization	Uses existing resources Retains existing markets and products Reduces competition	Takes a long time to merge cultures Merger match often difficult to find
Alliance	Formation of a formal partnership	Fills in gaps in product line Creates efficiencies (e.g., bargaining power) Reduces competition in weak markets Stabilizes referral base Shared risk	Potential for conflict between members Limits potential markets/products Difficult to align resources Governance issues
Joint Venture	Combination of the resources of two or more organizations to accomplish a designated task	Technological/marketing joint ventures can exploit small/large organizational synergies Spreads distribution risks	Potential for conflict between partners (shared vs. proprietary) Objectives of partners may not be compatible

Market Entry Strategies – Development

Directional Strategies

Mission

Vision

Values

Goals

Market Entry Strategies

Purchase

Acquisition
Licensing
Venture capital

investment

Cooperation

Merger
Alliance
Joint venture

Development

Internal

development

Internal

venture

Adaptive Strategies

Expansion of Scope

Diversification
Vertical Integration
Market Development
Product Development
Penetration

Contraction of Scope

Divestiture
Liquidation
Harvesting
Retrenchment

Maintenance of Scope

Enhancement
Status Quo

Market Entry Strategies – Development

Market Entry Strategy	Definition	Major Advantages	Major Disadvantages
Internal Development	Products or services developed internally using the organization’s own resources	Uses (leverages) existing resources Organization maintains a high level of control Presents image of developing (growth) organization	Time lag to break even Unfamiliarity with new markets Obtaining significant gains in market shares against strong competitors may be difficult

Market Entry Strategies – Development

Market Entry Strategy	Definition	Major Advantages	Major Disadvantages
Internal Development	Products or services developed internally using the organization’s own resources	Uses (leverages) existing resources Organization maintains a high level of control Presents image of developing (growth) organization	Time lag to break even Unfamiliarity with new markets Obtaining significant gains in market shares against strong competitors may be difficult
Internal Venture	Establishment of an independent entity within an organization to develop products or services	Uses existing resources May enable organization to hold a talented entrepreneur Isolates development from organization’s bureaucracy	Mixed record of success Organization’s internal climate (culture) often unsuitable

Market Entry Strategies – Development

Market Entry Strategy	Definition	Major Advantages	Major Disadvantages
Internal Development	Products or services developed internally using the organization’s own resources	Uses (leverages) existing resources Organization maintains a high level of control Presents image of developing (growth) organization	Time lag to break even Unfamiliarity with new markets Obtaining significant gains in market shares against strong competitors may be difficult
Internal Venture	Establishment of an independent entity within an organization to develop products or services	Uses existing resources May enable organization to hold a talented entrepreneur Isolates development from organization’s bureaucracy	Mixed record of success Organization’s internal climate (culture) often unsuitable
Reconfigure the value chain	Changing the activities or sequence of activities in the value chain and therefore change how value is delivered to the customer.	New approach may not be seen as a threat by existing competitors Captures a special niche of the market May create low-cost business model	Not always possible Initially must focus on a niche rather than entire market Must be first to recognize the new business model

Strategic Thinking Map
Hierarchy of Strategic Decisions and Alternatives

Directional Strategies

Mission

Vision

Values

Goals

Competitive Strategies

Strategic Posture

Defender
Prospector
Analyzer
(Reactor)

Positioning

Market-wide

Cost leadership
Differentiation

Market Segment

Focus/Cost

leadership

Focus/

differentiation

Market Entry Strategies

Purchase

Acquisition
Licensing
Venture capital

investment

Cooperation

Merger
Alliance
Joint venture

Development

Internal

development

Internal

venture

Adaptive Strategies

Expansion of Scope

Diversification
Vertical Integration
Market Development
Product Development
Penetration

Contraction of Scope

Divestiture
Liquidation
Harvesting
Retrenchment

Maintenance of Scope

Enhancement
Status Quo

Strategic Thinking Map
Hierarchy of Strategic Decisions and Alternatives

Directional Strategies

Mission

Vision

Values

Goals

Competitive Strategies

Strategic Posture

Defender
Prospector
Analyzer
(Reactor)

Positioning

Market-wide

Cost leadership
Differentiation

Market Segment

Focus/Cost

leadership

Focus/

differentiation

Market Entry Strategies

Purchase

Acquisition
Licensing
Venture capital

investment

Cooperation

Merger
Alliance
Joint venture

Development

Internal

development

Internal

venture

Adaptive Strategies

Expansion of Scope

Diversification
Vertical Integration
Market Development
Product Development
Penetration

Contraction of Scope

Divestiture
Liquidation
Harvesting
Retrenchment

Maintenance of Scope

Enhancement
Status Quo

Strategic Postures

Strategic Posture	Definition	Advantages	Disadvantages
Defender	Focus on a narrow market with limited number of products or services and aggressively defend this segment through pricing or differentiation	Focus on limited set of products and services Focus is on narrow market segment Stable environment Difficult for competitors to enter this segment	Reliance on the success of narrow product line Must have long/sustaining product life cycles Market segment must be stable – slow change May be unable to respond to major market/industry shifts Difficult to enter new markets or technologies

Strategic Postures

Strategic Posture	Definition	Advantages	Disadvantages
Defender	Focus on a narrow market with limited number of products or services and aggressively defend this segment through pricing or differentiation	Focus on limited set of products and services Focus is on narrow market segment Stable environment Difficult for competitors to enter this segment	Reliance on the success of narrow product line Must have long/sustaining product life cycles Market segment must be stable – slow change May be unable to respond to major market/industry shifts Difficult to enter new markets or technologies
Prospector	Continuously seek out new products and new markets	Always involved in “cutting-edge” developments Organization changes with changing environment Allows for a rapid response to a changing environment	Organization is in constant state of change New products and markets always being developed Multiple technologies being employed, seldom able to achieve efficiency Tend to have lower profits because of continuous change Tend to overextend resources Tend to underutilize financial, human, and physical resources

Strategic Postures

Strategic Posture	Definition	Advantages	Disadvantages
Analyzer	Balance market defense in some markets with selectively entering a limited number of markets or products	Allows for the maintenance of a core of stable traditional products and services Allows for high-risk products and services to be borne by prospectors Lower investment in research and development	Difficult strategy to pursue Must respond quickly to follow lead of key prospector while maintaining efficiency in core products/services Complex structure (matrix) Management of both stable and dynamic products and markets Communication is often difficult

Strategic Postures

Strategic Posture	Definition	Advantages	Disadvantages
Analyzer	Balance market defense in some markets with selectively entering a limited number of markets or products	Allows for the maintenance of a core of stable traditional products and services Allows for high-risk products and services to be borne by prospectors Lower investment in research and development	Difficult strategy to pursue Must respond quickly to follow lead of key prospector while maintaining efficiency in core products/services Complex structure (matrix) Management of both stable and dynamic products and markets Communication is often difficult
Reactor	Reacts to the strategies of competitors	Little strategic planning required (monopolistic or highly regulated environment)	Inconsistency in response to environmental change Instability in organization Organization becomes both ineffective and inefficient No effective guide for decision making

Positioning Strategies

Directional Strategies

Mission

Vision

Values

Goals

Competitive Strategies

Strategic Posture

Defender
Prospector
Analyzer
(Reactor)

Positioning

Market-wide

Cost leadership
Differentiation

Market Segment

Focus/Cost

leadership

Focus/

differentiation

Market Entry Strategies

Purchase

Acquisition
Licensing
Venture capital

investment

Cooperation

Merger
Alliance
Joint venture

Development

Internal

development

Internal

venture

Adaptive Strategies

Expansion of Scope

Diversification
Vertical Integration
Market Development
Product Development
Penetration

Contraction of Scope

Divestiture
Liquidation
Harvesting
Retrenchment

Maintenance of Scope

Enhancement
Status Quo

Positioning Strategies

Positioning Strategy	Definition	Major Advantages	Major Disadvantages
Cost Leadership	Low-cost/price strategy directed toward entire market	Provides clear competitive advantage Provides clear market position Provides opportunities to spend more than competition	Must obtain large volume Product/service must be standardized Product/service may be viewed as low quality

Positioning Strategies

Positioning Strategy	Definition	Major Advantages	Major Disadvantages
Cost Leadership	Low-cost/price strategy directed toward entire market	Provides clear competitive advantage Provides clear market position Provides opportunities to spend more than competition	Must obtain large volume Product/service must be standardized Product/service may be viewed as low quality
Differentiation	Development of unique product/service features directed toward entire market	Product/service viewed as unique Often viewed as high quality Greater control over pricing	Often difficult to adequately differentiate product or service Product/service may be higher priced

Positioning Strategies

Positioning Strategy	Definition	Major Advantages	Major Disadvantages
Focus – Cost Leadership	Low-cost/price strategy directed toward a particular market segment	Appeals to market segment seeking low price May develop good relations with market	Low quality may be associated low price Expansion of market may be difficult

Positioning Strategies

Positioning Strategy	Definition	Major Advantages	Major Disadvantages
Focus – Cost Leadership	Low-cost/price strategy directed toward a particular market segment	Appeals to market segment seeking low price May develop good relations with market	Low quality may be associated low price Expansion of market may be difficult
Focus -- Differentiation	Development of unique product/service features directed toward a particular market segment	Product/service may be customized to the special needs of the segment May develop close relationship with market segment	Market segment may remain small Price will probably be high

Strategy Combinations and Phases

Today Year 1 Year 2 Year 3 Year 4 Year 5 Time

SSU 1

SSU 2

SSU 3

Retrenchment (Product)

Market Development

Market

Development

Vertical Integration (forward)

Market

Development

Harvesting/Divest

Cash

Boundary Set by

Mission/Vision

Boundary Set by

Mission/Vision

External Environment

Chapter 6 Conclusions

After reading Chapter 6, you should be able to define the following terms:

Key Terms	Key Terms
Acquisition	Cooperation Strategy
Adaptive Strategy	Cost Leadership
Alliance	Defender Strategic Posture
Analyzer Strategic Posture	Development Strategy
Backward Vertical Integration	Differentiation
Combination Strategy	Diversification
Competitive Strategy	Divestiture
Concentric Diversification	Ends-Means Chain
Conglomerate Diversification	Enhancement

Chapter 6 Conclusions

After reading Chapter 6, you should be able to define the following terms:

Key Terms	Key Terms
Expansion of Scope Strategy	Internal Venture
Focused Factory	Joint Venture
Focus Strategy	Licensing
Forward Vertical integration	Liquidation
Generic Strategy	Maintenance of Scope Strategy
Harvesting	Market Development
Horizontal Integration	Market Entry Strategy
Implementation Strategy	Marketwide Strategy
Internal Development	Merger

Chapter 6 Conclusions

After reading Chapter 6, you should be able to define the following terms:

Key Terms	Key Terms
Penetration Strategy	Related Diversification
Positioning Strategy	Retrenchment
Product Development	Status Quo
Prospector Strategic Posture	Strategic Posture
Purchase Strategy	Strategy Formulation
Reactor Strategic Posture	Unrelated Diversification
Reconfigure the Value Chain	Venture Capital Investment
Reduction of Scope Strategy	Vertical Integration

Assignment

Using the Strategic Thinking Map – Hierarchy of Strategic Decisions and Alternatives in Chapter 6 as a guide, find examples of three types of strategies (for example, market development, merger, alliance) from the popular literature.

Good sources of healthcare strategy examples include The Wall Street Journal, Business Week, your local newspaper, or one of several health care periodicals.

You may also use website searches.