Term Paper on "Internal External Partner Analysis"

Term Paper 11 pages (3033 words) Sources: 0

[EXCERPT] . . . .

Health Care

MCMPC is facing a business environment that is becoming progressively worse. Competition is increasing, in the form of Innovative Medical, a company that is rapidly expanding both through consolidation and through new construction. MCMPC is run by a dedicated physician in Dr. Balko, but has little in the way of managerial competency. This puts MCMPC at a strategic disadvantage. They are unable to attract specialists and as such they risk losing their patients to the more integrated Innovative Medical system. Most of the problem at MCMPC can be addressed, but there appears to be little managerial will be do so.

The situation facing MCMPC today is that the company needs to make a decision about its strategic future. There are a number of options available, of varying appeal. The company can sell out to Innovative, which is seeking further expansion and is eyeing the Middletown market. MCMPC also has the option to forge alliances with either Riverside, a facility that performs poorly but has a niche in bloodless surgeries for the area's Jehovah's Witness community or with Good Sisters, a high performing facility that has experienced downturn in its business the past year or two.

Complicating the issue are the high personal stakes involved. Dr. Balko founded MCMPC and remains today the leader of the organization. There appear to be personal stakes involved with respect to Innovative in particular. Dr. Balko is also not interested in the managerial aspects of the job, which has made it difficult to forge alliances in the past and also impacts on the performance at MCMPC. Any recommendation made to MCMPC would need to be approved by Dr. Balko; however, the objective of this report is to make the best recommendation not to anticipate what Dr. Balko's reaction might be.

Internal Analysis Memo

MCMPC is operating at present from a position of weakness. This does not mean that the company has to resources or competencies, but clearly the assets and attributes of MCMPC are inferior to those of Innovative. In terms of resources, MCMPC has a twenty-five years history, which has allowed it to build its brand in the community. This has also allowed Dr. Balko to build his own personal brand in the community and it seems reasonable that some of the brand equity in MCMPC is attributable to Dr. Balko's ongoing presence. The facility has a long history of profitability, so it is reasonable that the balance sheet is relatively healthy, although perhaps weakened by recent poor performance.

A core resource weakness is that lack of specialists or partner hospitals. This is a critical resource for firms in the industry as it allows them to retain customers better. Having these specialists and linkages to hospitals is also important for attracting customers in the first place. Customers are not concerned about the need to travel to see specialists in the inner urban areas, so it is entirely feasible for MCMPC to cultivate this resource. While there is economic motivation to build this resource, there appears little personal motivation from Dr. Balko to do so, so this resource remains underdeveloped to the detriment of MCMPC.

Some of the competencies currently on display at MCMPC include a high level of patient care. The staff has demonstrated that they are caring and responsive. In addition, Dr. Balko has demonstrated a unique dedication to the clinic's patients. This dedication has allowed MCMPC to capture customers who are disgruntled with their service at Innovative. MCMPC sets the bar for service in the region, and this is one of the main sources of competitive advantage that the facility has, in particular against Innovative. However, this patient care quality is compromised by the deteriorating staff morale that has resulted from uncertainty about the facility's future.

In terms of capabilities, they are limited. The clinic performs a relatively small amount of functions, in particular when compared to any of its competitors. There are few linkages with specialists or hospitals in the area, which would facilitate patient growth and retention. What MCMPC does with respect to patient care is good, but they do not do enough in a competitive environment that is geared towards integrated service providers.

Overall, MCMPC has the feel of a company that is good at what it does, but not great. One competency that is lacking almost entirely but is essential to long-term growth and survival is the management function. There is very little management or organizational structure of any type at the clinic and those managers that are in place can be ineffective with regards to the performance. Management is ad hoc at best, with no attention to strategic considerations and a seeming lack of willingness to address even pressing managerial issues.

External Analysis

The external environment presents a number of opportunities but a number of threats as well. The market is becoming increasingly diverse and this has created a number of different niches that can be exploited by a service provider seeking to adopt a differentiated strategy. The Jehovah's Witness market is one such niche, and only one facility in the area currently serves this market. Dealing with this market would require the development of new skills but the clientele would be loyal to the clinic as a result. There may also be opportunities in providing Spanish-language services to the region's growing Hispanic population.

Another set of demographic shifts has brought opportunities in both pediatric and geriatric care. Each of these specialties is subject to a growing market in the region, providing opportunity to build niches. Geriatric patients are a double-edge sword, since they are on Medicare, which could be subject to restrictions under the new federal health care plan. However, they are a captive audience as they are the one major patient group that is largely unwilling to travel into New York City in order for medical care. However, they often need to see specialists, which puts MCMPC at a competitive disadvantage in addressing this market. There is also opportunity with respect to geographic growth, as the Darien Hill Hospital is set to close, opening up an opportunity in the southeast of the county.

Affiliations are another potential opportunity for MCMPC. The facility has the opportunity to partner with a strong performing but struggling clinic at Good Sisters, or a Jehovah's Witness specialist at Riverside. Both of these companies offer some benefits to MCMPC that are worth considering, but neither is a perfect partner.

There are a number of threats in the external environment as well. The first is the increase in competition from Innovative. This company is growing rapidly and is encroaching on the territory of MCMPC. They may not have a good reputation among patients but as an integrated provider with access to a large number of specialists, they are able to deliver a high standard of care to most any patient that they see. They have successfully defended antitrust charges, and it is likely that this happened because of the willingness of local citizens to seek health care outside of the country. As such, Innovative could conceivably eliminate MCMPC from the market without fear of antitrust problems. The out-of-county providers are also a threat, since they attract up to 50% of local citizens. These out-of-county providers are arguably as large a threat as Innovative because they are also integrated providers that can outcompete MCMPC on specialists and referrals.

The country is building a new facility in Middletown that provides a direct competitive threat to MCMPC. This facility will be closely affiliated with Innovative, and not affiliated with MCMPC. The close integration of the country (CRMC) and Innovative is a strong threat to MCMPC because it is becoming a virtual monopoly on medicine in the area, with many area physicians either switching to join Innovative or choosing to unwind their practices.

The economy is also a threat to some degree, and potentially health care reform could be as well. Health care services are generally price inelastic due to their necessity but there are signs that this is changing. Insurance companies may be losing some of their pricing power in light of companies struggling to pay premiums for their employees. As insurance costs hit their ceiling, this will trickle down to the clinics as reduced demand and price caps from the insurance companies. In addition, health care reform is an indicator that the Federal government (and by extension Medicare) is reaching the point where it needs to strenuously curtail rising health care costs. As entities such as insurance companies and Medicare have pricing power over the clinics, it is the clinic that suffers and this may be affecting smaller providers like Good Sisters and MCMPC.

The competitors are a critical component of the external environment. Innovative is the major competitive threat in the local market. They have 10 locations, 180 physicians and 1100 employees. In the short-term Innovative expects to grow rapidly, adding 20 physicians and 400 employees. If these figures hold, innovative is going to be less profitable in the future than… READ MORE

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