course material

1. competitive advantage.
Discuss the resource-based view of competitive advantage. Why is it important to
understand organizational differences to use this approach?Briefly define what is meant by
competitive advantage. Are competitive advantage and sustained competitive advantage
identical concepts? Compare and contrast the two concepts.Professional Development: Case
Study #12: AIDSCAP NepalConduct an internal environmental analysis, identifying the
value-creating strengths and weaknesses for each value chain component. Model your
response after Exhibit 4-4 (p. 144) “Value Creating Strengths and Value Reducing
Weaknesses.”For each strength, assess the competitive relevance, using Exhibit 4-6 (p. 149)
as an example.Exhibit 4–4: Value Creating Strengths and Value Reducing Weaknesses for
American Healthways, Inc.Value Chain ComponentService Delivery, Pre-ServiceService
Delivery, Point-ofServiceService Delivery, AfterServiceSupport Activities, CultureSupport
Activities, Strategic ResourcesValue Reducing Weakness• Limited brand identity • Disease
management and care enhancement contracts require extensive selling because of lack of
knowledge of key benefits • Revenues subject to seasonal pressures from enrollment
processes of contracted health plans• Company/employees have less experience in care
enhancement programs in expanded product line areas such as end-state renal disease,
fibromyalgia, etc. • A majority of company’s revenues accounted for by three health plans•
Incomplete or inaccurate data could render independent evaluation of clinical interventions
useless• Acquisition of StatusOne Health System with different culture • Company’s
reluctance to declare cash dividend may discourage some classes of investors• Hospital
contracts decreasing • Cost to maintain IT for compliance with federal and state regulations
• High labor costs from competition for staff • Volatility of stock price and trading
volumeValue Creating Strength• Customer benefit: care enhancement/disease management
concept (attractive to health plans, hospitals, physicians, patients) • Customer benefit
developed: geographical coverage (attractive to large health plans) • Six care enhancement
centers• Successful management of diseases leading to reduced costs and increased
customer satisfaction • Company employees highly experienced in implementing care
enhancement programs in certain areas, such as diabetes • Integrated care product line
attracts broad range of patients • Number of covered lives increasing making economies of
scale possible• Alliance with Johns Hopkins Health System to independently evaluate
effectiveness of clinical interventions• First disease management and care enhancement
provider in nation accredited by all three accrediting agencies • Highly professionalized
culture • Experienced management team of individuals with extensive health care

2. experience and longevity with the company • Conservative fiscal management philosophy:
retain earnings for future growth and development • Company has state-of-the-art medical
information technology • Company has sound financial position: cash, working capital,
stockholder equity increasing over past year • Earnings per share of common stock has
increased despite 3:2 stock split in 2001 and 2:1 stock split in 2003.Exhibit 4–6: Strategic
Thinking Map of Competitive Advantages Relative to Strengths in GeneralIs the Value of the
Strength High or Low? (High/Low?)HHHHHHHHIs the Strength Rare?
(Yes/No)NNNNYYYYIs the Strength Easy or Difficult to Imitate?
(Easy/Difficult)EEDDEEDDCan the Strength Be Sustained?
(Yes/No)YNYNYNYNImplicationsNo competitive advantage. Most competitors have the
strength and those that do not can develop it easily. All can sustain it. Maintenance
strategy.No competitive advantage. All competitors have the strength which is easy to
develop. Strength is not sustainable so it represents only a short-term advantage.No
competitive advantage. Many competitors possess the strength but it is difficult to develop,
so care should be taken to maintain this strength.No competitive advantage. Many
competitors possess the strength but it is difficult to develop, and those who do possess it
will not be able to sustain the strength. Only a short-term advantage.Not a source of long-
term competitive advantage. Because it is valuable and rare, competitors will do what is
necessary to develop this easy-to-imitate strength. Short-term advantage. Should not base
strategy on this type of strength but should obtain benefits of short-term advantage.Not a
source of competitive advantage. The strength is easy to imitate and cannot be sustained.
Short-term advantage. Do not base strategy on this type of strength but obtain benefits of
short-term advantage.Source of long-term competitive advantage. If value is very high, it
may be worth “betting the organization” on this strength.Possible source of short-term
competitive advantage but not a strength that can be sustained over the long run.Ginter, P.
M., Duncan, W. J., & Swayne, L. E. (2013). Strategic Management of Health Care
Organizations (7th ed.). San Francisco: Jossey-Bass.