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Business Plan for opening a private hospital in South Africa


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South Africa as a country holds a really dominant position in the African region, in last few years the country has seen some real development in the public and private health sector. Majority of the private hospitals in South Africa are mainly targeted towards the upper class people who can easily afford to avail expensive services. Opening a new private hospital needs proper assessment in terms of which area to target and what kind of services needs to be provided. The overall health industry of South Africa needs further advancement in its current infrastructure, with proper funding and support from the government.

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Business Plan for opening a private hospital in South Africa

  1. 1. 1 Executive Summary With the passing of time and as more and more rapid changes are taking place many organizations are going global and they are getting themselves involve in international business. As more and more organizations are getting themselves involved in international business they are undoubtedly making more profits but at the same time they face other major issues. In doing international business, companies face various issues which sometimes are due to domestic situations and in some cases are the results of events taking places internationally. Companies have to make sure that what strategies they come up with, whatever plans they design should and must comply with other government policies. South Africa as a country holds a really dominant position in the African region, in last few years the country has seen some real development in the public and private health sector. Majority of the private hospitals in South Africa are mainly targeted towards the upper class people who can easily afford to avail expensive services. Opening a new private hospital needs proper assessment in terms of which area to target and what kind of services needs to be provided. The overall health industry of South Africa needs further advancement in its current infrastructure, with proper funding and support from the government.
  2. 2. 2 Introduction Despite the size of the company and regardless of their business in which they are dealing all the companies need to have proper strategies that need to be followed. Many firms get themselves involved in international strategic management which is a comprehensive and ongoing management planning process aimed at formulating and implementing strategies as a result of which companies will be able to compete internationally (Fisher, 2006) Opening a new hospital in South Africa for the local public over there is going to be a good step, but before one proceeds it is important to analyze the country situation in terms of their economy, political, security wise and so on. With the help of (HR & R) a lot of new jobs have been made available in the local market. Designing strategies for conducting international business is not easy at all, as companies before getting themselves involved in going international have to consider many issues and complexities that they might face in the future. In order to conduct international business, companies must first do the evaluation of their corporate objectives, organizational strengths and weaknesses and strategies (Louis, 2010) In real terms, developing international strategy is considered to be more complex then developing local strategies, mainly because in developing international strategies there are various factors that play their roles in the success of a company business.
  3. 3. 3 Doing Business in South Africa Doing Business in any country regardless of the industry sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations. With the help of analysis it measures and tracks changes in regulations affecting 10 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency (Willi. M). Where does the economy stand today? South Africa is generally considered as the leading nation in Africa, what it takes to start a business in South Africa, what are the legal requirements and what rules one needs to keep in mind. According to data collected by Doing Business, starting a business in South Africa requires 5 procedures, takes 19 days, costs 0.3% of income per capita and requires paid-in minimum capital of 0.0% of income per capita. Starting a Business If we take a look on South Africa globally, the country stands at 44 in the ranking of 183 economies on the ease of starting a business (Willi. M). The rankings for comparator economies and the regional average ranking provide other useful information for assessing how easy it is for an entrepreneur in South Africa to start a business. But for those who are willing to enter the South African market they have to do a proper research of the local market and most importantly it depends on who you know there.
  4. 4. 4 About SA South Africa is generally considered as one of the dominant states in Africa that is backed by the most advanced military and the highest military spending in the continent (Country Intelligence, 2012). The location of the country is in southern part of Africa that leads to relatively high levels of trafficking across borders, raising few issues with different countries. The country’s increasing influence is leading it to become the ‘security exporter’, with the aim of helping to stabilize security situations on the African continent. Economic Market of SA In terms of the economy the country isn’t doing that well, for South Africe there is an increasing concern about how well the domestic economy can support growth in the wake of weak global demand. Specially after the hit of GFC the country is still not been able to stand properly, the overall Domestic spending is increasingly seeing weakness as the overall employment rate is going down and disposable income is restricted by high personal debt levels. (Country Intelligence, 2012). In order to deal with this issue the South African government is prioritizing employment creation along with its industrial policy and growth initiative is successful in establishing labor-intensive and import- substituting industries. Political Situation of SA At present keeping an eye on the current situation of South Africa, there are high chances that broad political stability is likely to persist mainly because of the reason African Nation Congress dominates the national and provincial level. Also there are very strong institutes that act independently from the government (Political Culture, 2005). In South Africa, the rights of peoples or communities in respect of the exercise of their culture (or ethnicity as it is more commonly referred to in international law), religion and language are sometimes seen to constitute a “neglected and forgotten category of human rights, majority of the people are not treated properly, they are treated as the ‘poor relatives’ of other human rights’. Indeed, while cultural rights are enumerated with economic and social rights (Political Environment 2012)
  5. 5. 5 Along with that the government at present is having issues because of the high level in poverty, which is encouraging people to join new political parties (Political Culture, 2005). There is also a growing concern in the country’s left wing-factions posing ongoing riks to South Africa. However at the same time the establishment of the Congress of the people will help the government in the long run. Greater public awareness of environmental rights are need to be communicated to the general public, that means more environmental problems are brought to the attention of politicians or the media. Overall public actions in the long-term will do more to discourage behavior that is harmful to the environment than any law can do by itself. Cultural Environment Terpstran9 (1987) has defined culture as follows: "The integrated sum total of learned behavioral traits that are manifest and shared by members of society" Just like many other countries around the globe, even in South Africa the family forms the central unit of this country’s society. There are various tribes in South Africa and every tribe have its own customs and leader who are mostly responsible for the key decisions. Social and cultural aspects of a society form its very nature. As "culture" is the essence of a society, the family or tribe also serves as a community of support both emotionally and financially. The importance of these units varies according to the background of the South African. Whereas the English speaking white community of South Africa is considered as the elite class (Doing Business in South Africa, 2009). The South African culture also reveals itself in many ways and in preferences for colours, styles, religion, family ties and so on. As far as the communication styles are concern in the community they are generally dependent on the individual cultural ancestry. . For most English-speaking South Africans, pride in their heritage tends to create a more reserved and conservative manner of communication that aims to avoid conflict. In comparison, those of an Afrikaaner background are frequently described as having a more direct and explicit
  6. 6. 6 approach to communication, where the goal is to be forthright and honest (Doing Business in South Africa, 2009). Culture, alongside economic factors, is probably one of the most important environmental variables to consider in global marketing. Culture is very often hidden from view and can be easily overlooked (Frank, R. H, 1991). Health Care Industry of SA If we have a look on the health industry of South Africa there is very limited amount of data exist on the private hospital market prior to 1990 (Country Intelligence, 2012). It is contended that in the late 1980s, the hospital market was highly disaggregated and no hospital groups existed on the national level. However, later on with the growing concern of health a new trend began to emerge where private hospitals were increasingly consolidating through mergers and acquisitions by other local and international hospitals. By 1999, hospital consolidation had reached a high level and the three major hospital groups controlled most of the acute beds in South Africa. In general the private hospital industry still needs a lot of development and further advancement in its technology, at the same time the industry disagrees with the perspective that concentration fuelled rising costs (Country Intelligence, 2012). Private Hospitals Along with the public hospitals, private hospitals play a very significant role in the South African health system (Willi. M). Though as mentioned earlier that the health industry still needs improvement but the private hospitals are far advance and better than the public hospitals, mainly because of the funds and investments provided to them. However the access to private hospital services is still very limited largely because they cost significantly more than services in the public sector. Beneficiaries of medical
  7. 7. 7 schemes are the primary customers of the private hospital industry, although an increasing trend of self-funding patients has been reported. Keeping an eye on the changing preferences of the medical scheme population has been able to influence a significant shift from utilization of public hospitals to private hospitals since 1990. For all these reasons, opening a new private hospital where the services will be provided to middle and lower class people is aimed. Private hospitals have experienced substantial growth with the total number of private sector beds increasing by 32% since 1998 to the current estimated 27 500 beds(Willi. M). Private hospitals are mostly located in the major metropolitan areas with most hospitals found in Gauteng, KwaZulu-Natal and the Western Cape, targeting the upper class people who can easily afford to avail good quality service (Willi. M). The private hospital industry consistently attracts the attention of health care funders and other regulatory authorities regarding its cost structures and pricing practices. A perception is already build that the fee-for-service reimbursement mechanism implemented by medical schemes encourages over-servicing thus driving cost-escalation in the environment which makes private hospital services unaffordable for the majority of South Africans. This is a growing concern and if by providing good quality service at cheaper rates to a large market, the new private hospital will definitely be a success. Conclusion The overall business culture of South Africa has changed a lot in last few years; more and more foreign investments have been encouraged to get in, and at present South Africa is the wealthiest country in Africa and is proud of this fact. The country has a male life expectancy of only 52 years, an AIDS epidemic and an economy where 10% of the population accounts for more than half the nation's income. Highlight the need for
  8. 8. 8 the implementation of a comprehensive approach to regulate private hospital services with focus on costs, quality and transparency, is something to focus on. Appendix References 1. Fisher. G, Hughes. R, International Business, Managing in the Asia Pacific 3rd Edition, Pearson. 2. Louise. B, Kurtz. D, Contemporary Business 3. Country Intelligence: Report 2nd July, 2012
  9. 9. 9 4. Willi. M, ‘Private Hospitals’, annual report 2006 5. Employment Creation Slows in South Africa 20 JUN 2012 6. Construction Sector Remains Fragile in South Africa 19 JUN 2012 7. Political Environment, ‘The impacts of Political Environment’, viewed on 17th Aug 2012 <> 8. Political Culture ‘In the New South Africa’, published on 7th Sep 2005 9. Franke, R.H., Hofstede, G. and Bond M.H. "Cultural Roots of Economic Performance: A research note". Strategic Management Journal Vol. 12, Sum. 1991, pp 165-173 10.Terpstra, V. "International Marketing", 4th ed. The Dryden Press, 1987.