2. “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
5. 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
6. 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
•Focus/ •Actions
Development
Maintenance Scope •Timelines
•Internal Venture Differentiation
•Enhancement •Responsibilities
•Status Quo
7. Exhibit 6-6: Related and Unrelated Diversification by a Primary
Provider
Physician
Physician
Group
Group Ambulatory
Ambulatory
Hospice
Hospice Care
Care
Diagnostic
Diagnostic Long-term
Long-term
Lab
Lab Care
Care
Radiation
Radiation Home
Home
Treatment
Treatment Hospital Health
Health
Hospital
Outside the Health Within the Health
Care Industry Care Industry
General environment
General environment Health Care Environment
Health Care Environment
••Restaurants
Restaurants ••Pharmaceuticals
Pharmaceuticals
••Health and fitness
Health and fitness ••Medical Supplies
Medical Supplies
••Parking lots
Parking lots ••Insurance
Insurance
••Shopping Centers
Shopping Centers ••Managed Care
Managed Care
••Office Building
Office Building ••Medical Schools
Medical Schools
••Laundry
Laundry ••Others
Others
Related Diversification
Unrelated Diversification
8. 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
9. 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’
10. Positioning Strategies
Exhibit 6 – 15: Porter’s Matrix
Strategic Advantage
Uniqueness Perceived
By the Customer Low Cost Position
Marketwide Overall Cost
(broad) Differentiation Overall Cost
Differentiation Leadership
Leadership
Strategic
Target
Particular
Segment Only Differentiation/Focus Cost/Focus
(narrow)
Differentiation/Focus Cost/Focus
11. 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 44 22
1. Future Quadrant
Future Quadrant Internal Fix-it Quadrant
Internal Fix-it Quadrant
2.
••Related diversification
Related diversification ••Retrenchment
Retrenchment
3.
••Vertical integration
Vertical integration ••Enhancement
Enhancement
4. ••Market development
Market development ••Marketdevelopment
Market development
••Product development
Product development ••Productdevelopment
Product development
••Penetration
Penetration ••Vertical integration
Vertical integration
••Related diversification
Related diversification
List External Threats 33 11
1. External Fix-it Quadrant Survival Quadrant
2. External Fix-it Quadrant Survival Quadrant
3. ••Related diversification
Related diversification ••Unrelated diversification
Unrelated diversification
4. ••Unrelated diversification
Unrelated diversification ••Divestiture
Divestiture
••Market development
Market development ••Liquidation
Liquidation
••Product development
Product development ••Harvesting
Harvesting
••Enhancement
Enhancement ••Retrenchment
Retrenchment
••Status quo
Status quo
12. Product Life Cycle
(sales and profit)
Volume
Introduction Takeoff Maturation Obsolescence
Stages
Check p. 273
13. Product Life Cycle/Strategic choices
Market development
(sales and profit)
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
15. 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
16. Exhibit 8 – 1: The Value Chain
Pre-Service Point-of-Service After-Service
Market/Marketing Research Clinical Operations Follow-up
Target Market Quality Clinical
Serv
Services Offered/Branding Process Innovation Marketing
ice
Pricing Marketing Follow-on
Promotion Patient Satisfaction Clinical
Del
Distribution/Logistics Product Development Marketing
iver
Market Development
Penetration
y
Enhancement
Differentiation
Organizational Culture
Shared Assumptions Shared Values Behavioral Norms
s
vitie
Organizational Structure
Acti
Function Division Matrix
ort
p
Strategic Resource
Sup
Financial Human Information Technology
Source: Adapted from Michael Porter
17. 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
18. Exhibit 8 – 8: Conceptual Model of Service Quality
CONSUMER
Word-of-Mouth
Word-of-Mouth Personal Needs
Personal Needs Past Experience
Past Experience
Communications
Communications
Expected Service
Expected Service
Gap 5
Perceived Service
Perceived Service
MARKETER
Service Delivery
Service Delivery
(including pre-
(including pre-
and postcontacts)
and postcontacts) External
External
Gap 3 Communications
Communications
to Consumers
to Consumers
Translation of
Translation of
Gap 1 Perceptions into
Perceptions into
Service Quality
Service Quality
Specifications
Specifications
Gap 4
Management
Management
Perceptions of
Perceptions of
Consumer
Consumer
Expectations
Expectations
19. Exhibit 9 – 1: Consistency in Value Adding Support Strategies
Organizational
Culture
Organizational Strategic
Structure Resources
Strategic Leadership
20. 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
22. 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
•Catalyst
Cultivation – focused on enrichment, •Analyzer posture
•Differentiation - focus •Cultivator
ensures the fullest growth of the
•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.
24. Exhibit 9 – 3: Functional Structure Combined with Process Structure
CEO
CEO
Functional Human Clinical Finance & Information Maintenance;
Structure Marketing Human Clinical Finance & Information Maintenance;
Marketing Resources Operations Accounting systems Housekeeping
Resources Operations Accounting systems Housekeeping
Functional Clinical
Structure Medicine Surgery Obstetrics Pediatrics Clinical
Medicine Surgery Obstetrics Pediatrics Services
Services
Process Pre-Op Anesthesia Surgical Post-op
Structure Pre-Op Anesthesia Surgical Post-op
Preparation Prep & Adm. Procedure Recovery
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
25. Exhibit 9 – 4: Divisional Structure – Product with Geographic Divisions
CEO
CEO
Corporate Services
Corporate Services
•Legal
•Legal
•Planning
•Planning
•Marketing
•Marketing
•Administrative Services
•Administrative Services
Product Affiliated Medical Professional
Structure Insurance Foundation Hospitals Affiliated Medical Professional
Insurance Foundation Hospitals Services Management Services
Services Management Services
Geographic Western Southern Eastern
Structure Western Southern Eastern
Division Division Division
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 making guidelines
division •Creates competition for resources
•Identifies responsibility and accountability
•Develops general managers
26. Exhibit 9 – 5: Matrix Structure
CEO
CEO
Human Finance && Information Maintenance;
CLINICAL Marketing Human Legal Finance Information Maintenance;
CLINICAL Marketing Resources Legal Accounting systems Housekeeping
Resources Accounting systems Housekeeping
Medicine
Medicine
Surgery
Surgery
Obstetrics
Obstetrics
Pediatrics
Pediatrics
Clinical
Clinical
Services
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
27. 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
28. • “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
30. Exhibit 11 – 2: The concept of control
Set Objectives
Set Objectives Compare
Compare Determine
Determine
Measure
Measure Take
Take
Or
Or Objectives
Objectives Reasons
Reasons
Actual
Actual Corrective
Corrective
Redefine
Redefine With
With For
For
Performance
Performance Action
Action
Objectives
Objectives Performance
Performance Deviation
Deviation
31. 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
32. 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
