Strategic planning involves defining a laboratory's strategy to withstand competitive forces by understanding industry structure, competitors' strengths and weaknesses, identifying a unique market position, and focusing on growth. It contrasts with operations management which efficiently uses resources. A laboratory should understand its industry's concentration, barriers to entry/exit, separate roles of payors/purchasers/beneficiaries, economies of scale, and powerful buyers/sellers to strategically position itself. Common positions include outpatient-centered, reference-centered, and hospital-centered testing. Strategies can fail due to straddling multiple positions, pursuing growth that does not fit capabilities, or exhibiting hubris. SWOT and competitor analyses help develop and implement effective strategies.

1. Strategic Planning
Dr Varsha Shahane

2. Objectives
• To define strategy and contrast strategic
planning with the management of operations
• To describe the competitive structure of the
laboratory industry
• To articulate the elements of competitor
analysis
• To characterise strategic positions commonly
used by clinical laboratories
• To explain how strategies are sustained and how
they commonly fail

3. Marketing
Finance
Operations

4. Introduction
• Operations management –
efficient use of resources,
supply chain management,
financial planning,
quality control.

5. • It includes optimizing all processes namely –
 marketing
client services
specimen processing
billing
safety
information technology
testing operations

6. Business strategy
• It is all about equipping an organization to withstand
competitive market forces
• To maximise the effectiveness of each part of the lab
system (operations management)- delete parts
which do not fit into the strategy (business strategy)
• To understand the structure of her industry, her
firm’s competitors, define a unique market place for
her lab, enable her lab to withstand fierce
competition
• Be creative but disciplined.....focus on GROWTH !

7. Elements of business strategy
• Understanding industry structure
• Assessing a firm’s and competitors’ strengths
and weaknesses
• Identifying a distinctive market position
• Adopting business activities that reinforce a
market position
• Avoiding common strategy traps
Operations management ↔ Business
strategy

8. Economic theory
• When one firm earns profits that are larger
than average, other organizations will emulate
the firm’s practices and subsequently be on
the same level of profits as that of the firm.
• So, profitability of firms in an industry should
tend to equalize over time.
• If a firm consistently outperforms its
adversaries, then there are factors other than
operational effectiveness at work in the
marketplace

9. Strategic planning- to formalise
or not to formalise, that is the
question !

10. • Henderson – most dangerous competitors are
the ones who are like you !
o Differences between you and others are the
basis of your advantage
o Also, not all stakeholders be involved in
developing a business strategy
o No need of a written document
Work upon the differences between your firm
and its competitors ONLY and build your
strength on this factor alone

11. • Kim and Maugorgne opine that when all
stakeholders are included in the strategic
planning, the competitive agendas of each one of
them clash and a clear sense of purpose is lost
• Some think that a written document can in fact
mislead an organization. Because business
strategy is all about ‘insights’ rather than ‘plans’
• Current needs and demands, the current trends,
selling skills etc –The present TIME- has to be
considered rather than a standardized document.

12. • According to some – inputs/ feed back is very
crucial to develop strategies. This is not so in
case of ‘non profit companies’ or ‘ mission
based/ charitable’ firms

13. Formal strategic planning process
• Formation of strategic planning committee
• Development of a mission statement – values and
targets
• Situation analysis – strengths and weaknesses of
the organization are analysed. Threats and
opportunities are identified
• Development of tactics (specific objectives) that
will further the organization’s mission
• Formalize and document all policies of the
strategic plan and distribute it to all board
members and senior staff

14. Structure of the Clinical
Laboratory Industry
• Competition pressure is not only from the
existing rivals but also from
 potential future candidates
 substitute products
 customers
 suppliers
So, first know the structure of your firm !
KNOW THYSELF !!

15. So, first know the structure of your firm
KNOW THYSELF !!

16. (i) Size of the testing market
As a rule : Revenue = Quantity x price
Demand α 1/ price
• Inpatient v/s Outpatient
• Routine v/s esoteric
(ii) Concentration of competitors
• Mergers and acquisitions of hospitals
• Consolidation of commercial labs

17. (iii) Barriers to entry
• State and federal regulations – labs must meet
experience and education demands
(accreditation) – limit entry to lab industry
• Customer and physician loyalty
• Inaccessibility to doctors
• Cost to customers of switching – patients and
physicians switch from lab to lab- patient data
update problem

18. (iv) Barriers to exit
• Unprofitable hospitals not permitted to be
closed by local community
• Specialised staff in unprofitable hospitals/labs
not willing to leave employers produces
surplus of competitors- lab/ hospital keeps
‘working’ without any work !

19. (v) Seperation of payor, purchaser
and beneficiary
• Insurance companies and government is the
payor. Rarely it is the patient, nowadays.
• It is neither the payor nor the patient who
orders the lab services. It is the doctor.
So the health care industry is fragmented as the
roles are separate- it can affect competition and
incentives. Exact inferences cannot be made -
affects policy making.

20. (vi) Economies of scale
• Volume of tests done per full time staff and
cost/test- most important to determine cost
effectivity. Other factors which have a heavy
impact on economy of the lab namely,
marketing, courier, transportation services,
professional oversight, informatics are
overlooked.

21. (vii) Markups and Kickbacks
• Doctors consultation fees added to the lab
services in insurance programs – markups
• Doctors benefit from the lab economically by
way of referral services to that lab – kickback
• Unnecessary tests avoided, but with strict
laws, lab offers services at higher price than
the prices offered with the markup policy !

22. (viii) Powerful buyers and sellers
• Sellers build a strong and close relation with
buyers. They produce a unique position for
themselves and thereby blunt all the
competition.
• Insurance companies are powerful buyers who
greatly influence the working of the lab in
many respects, namely, reporting structure,
turn around time, costs, billing policies etc

23. (ix) Substitute products
• Certain factors like (i) non laboratory workers
using lab equipments (ii) pharma companies
running medical programs and (iii) demanding
lab services - over the counter requests –
affect the overall working of the lab industry.
It alters the total scenario of the present day
trends in the lab industry. USA has strict laws
to curb these factors, not so in many
developing countries.

24. (x) Economics of inpatient care
• This refers to inpatient/ hospital based labs.
Depends totally on the responsible physician
or the hospital policy which solely influences
its economics.

25. Strategic positions in the
lab industry
• It refers to an organization’s commitment to
serve the needs of a ‘specific group’ of
customers or ‘specific needs’ of customers

26. Types of strategic positions
• Variety based : perform narrow scope of
services exceptionally well, faster and
sometimes at cheaper rates than rivals
• Need based : to serve the needs of a defined
demographic group
• Access based : due to geography or
differences in size of the customer pool

27. • Cost based : some competitors profit by
lowering the production costs
• Product differentiation-based positioning :
convincing the customer through marketing or
different attributes that their product is
superior

28. Strategic positions of clinical
laboratories
• To differentiate themselves from rivals
• To defend their operations from competition
 outpatient – centered testing : exclusive contracts
with multiple insurers, large volume to contain costs,
extensive courier system
 Reference centered testing : specialized and
esoteric testing, specimen logistics, professional
support
 Hospital-centered testing : support for inpatients
and intensive care, participate in hospital planning
committees

29. • Discipline centered testing : specific tests with
specific format of reporting ( urology,
dermatology etc) eg- PSA + prostate biopsy
reports
• Community centered testing : outreach by
hospital labs to physicians on medical staff
• Multi-hospital core laboratory : centralization
of routine testing by labs of a multi hospital
system
• Co tenancy : shared ownership of esoteric lab
by a group of hospitals

30. Implementing strategy
• Tradeoffs
• Hospital based labs ↔ community physicians
• Lab ↔ group/ association → insurance
companies , community physicians

31. Failure of strategy - 3 types
of preventable errors
• Straddling : an attempt to hold several stategic
positions at once, focus is lost. Trade offs !
• Growth trap : do the additional services fit
with the firm’s existing strategy ? And to the
existing competencies ?
• Hubris : loss of contact with reality and an
overestimation of one's own competence or
capabilities, especially when the person
exhibiting it is in a position of power.

32. SWOT Analysis
• Weakness →strength →opportunities →
threats
• Competitor Analysis :
competitor’s goals
competitor’s assumptions
competitor’s capabilities

33. SWOT Analysis - exercise
Favourable Unfavourable
Strengths Weaknesses
• Internal
• External
Opportunities Threats

34. Win over your competitors !
ALL THE BEST !!