Term Paper on "Marketing and Strategic Management"

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[EXCERPT] . . . .

Vietnam International Hospital Case Study

Using Porter's five forces, what does the picture look like for success?

Porter's Five Forces Analysis Model. Applying this to VIH shows what the picture looks like for success.

Threat of New Entry

There are high barriers to new entry as the majority of Vietnamese are content with the socialized and often low-quality medical care they receive already. There is a strong bias in the Vietnamese community to not pay for medical treatment, a result of being raised in a communist nation where socialized medicine, however bad, is free.

Established hospitals are unlikely to significantly increase their coverage as the majority of Vietnamese have not been educated on the advanced medical diagnostic and analysis techniques. As a result there is little threat of new entry into the high end of the market from established, socialized hospitals. This leaves the high end of the market underserved.

Competitive Rivalry

Medical evacuation services, the apex of medical services available in Vietnam, is seen only as the alternative for the wealthiest of Vietnamese and the senior executives who are expats.

In retrospect it is clear why medical evacuation companies didn't get into clinics and hospitals, as their medical evacuation services are built on cost structures that allow them to have a business model that flexes to the level of activity or inactivity of a select group of clients. Medical evaluation services have done well by staying with their elite and highly personalized service for a premium price. Further, it is rare that any Vietnamese would use the medical evacuation service as they would either use localized socialized medicine or use organic or handed-down medicines in their families.

Supplier Power

Suppliers, which in the case of the VIH, would be physicians who can speak multiple languages including English, French and possibly German, have a decided advantage in defining their salary and benefits details in going to work in the VIH. The reality is however that many of the physicians attracted to practicing in Hanoi would be those more inclined to see it a labor of altruism, similar to a personal mission of compassion.

Suppliers in the form of medical products manufacturers have significant leverage when selling into Vietnam, as the costs of freight are high and there is limited demand. Mr. Lee and Dr. Tan would need to bargain heavily to get the same prices for supplies as would be possible in Sydney, Singapore or San Francisco,

Buyer Power

Serving only a small percentage of the Vietnamese expat population which has dropped from 9,000 to 4,500 after the devaluation of the Cambodian currency and the crisis of confidence in the Vietnamese government's willingness to develop business.

Upper middle class and wealthy Vietnamese do not have awareness and appreciation of the advanced medical techniques offered by VIH and further, sees the pricing required to even get the entry-level programs offered but VIH as at least 10X what they pay, with bribes, to medical providers in their own socialized medicine programs.

Undertake a traditional SWOT analysis of the case.

The following is an analysis of the strengths, weaknesses, opportunities and threats for Vietnam International Hotel:

Strengths

Excellent facilities with state-of-the-art medical testing and treatment equipment.

Ability to attract financing with the concept of a premium hospital facility in Hanoi.

Initial strong positioning in the high-end of the expat marketplace.

Potential of transforming healthcare in the entire Southeast Asian region with a new concept of complete care for wealthy Vietnamese and expats looking for exceptional service.

Weaknesses

Ambiguous and unclear positioning in the Vietnamese and western expat community have made it very difficult for the VIH to make any progress with business development efforts.

When VIH begins to make staff reductions the rumors begin they are pulling out of Hanoi and ceasing operations.

A very elitist position begins with the very expensive service programs VIH launches the hospital with; the move to Australian pricing solves his somewhat but there is still a wide gulf between the pricing seen as reasonable by wealthy Vietnamese vs. even the lowest pricing of the VIH.

Opportunities

Defining the primary mission of the hospital as either for middle-class and wealthy Vietnamese and drastically modifying the services offered and therefore the costing structure in the process.

Defining themselves as the patient-facing part of the complete service medical evacuation service and do arbitrage of serious medical conditions before patients are airlifted to another hospital.

Investigate the opportunities of taking the hospital in a very specialized direction, in one specific area of treatment. Examples of this are reconstructive surgery for this part of the world.

Sell the VIH to a large, multi-national nonprofit healthcare organization that wants to set up a location in Hanoi.

Sell the hospital to a French firm and cut the losses.

Threats

Continued confusion regarding the business focus, either it is the high-end of the Vietnamese market or the expat market, both of which are very transitory as members of both markets eventually leave the country for more affluent nations and services.

Rejection by the Vietnamese as the VIH moves closer to expats and tries to capture these customers through a very westernized approach to service.

Continued struggles financially make it increasingly difficult to keep the best surgeons and physicians, and they leave to do humanitarian work in other nations, disillusioned with the vision of VIH.

The Communist government decides that it wants to be the sole provider of healthcare for its people and moves to close all privately-owned hospitals.

Based on the original concept of the hospital, do you think Mr. Lee and Dr. Tan made a realistic assessment of the Hanoi market for private medical care when they launched the project?

No, Mr. Lee and Dr. Tan allowed the basic concept of a high-end hospital, filling a very unique and potentially profitable hospital to get them and other investors motivated without first completing the necessary market research to see if the expat population in Hanoi could support a premium services hospital.

What was needed was a thorough needs assessment both of expats from western nations who had the expectation level of premium healthcare to begin with. From these expectations, their unmet needs could be measured and key value propositions of the VIH could have been ascertained. The path from unmet needs to a unique value proposition for the VIH however would need to be a methodologically sound one. Instead of taking this approach Mr. Lee and Dan Tan have replaced market research and analysis with an intuitive sense of the high end of the medical services market being a prime opportunity for them to sell a premium service to expats. What the painful experience of opening the VIH showed was that there was a very good reason that there was not a medical facility of this level of quality in Hanoi: the market could not support its ongoing operation. So what intuitively appeared as a wide swath of the high end of the market being open in actuality wasn't a real market at all.

Mr. Lee and Dr. Tan instead needed to first get an understanding of the supply and demand factors that brought expats into the country in the first place. The bhat's relative volatility in neighboring Cambodia and the resulting loss of confidence in the Vietnamese government's interest in developing business lead to an en masse migration of the target market of expats. Even secondary research completed as part of a broader market research strategy to gauge the true size of the market could have found this out. Secondary research in the form of business plans and even 10Ks on file with the Securities and Exchange Commission in the U.S., of corporations that moved to Vietnam would give a glimpse into the logic of companies moving into and investing in the region.

Mr. Lee and Dr. Tan would have done better to find out the factors that drove companies to come into Vietnam in the first place, and cheap labor would not be an acceptable answer. What else are the factors driving this migration and what type of managers are being transferred to Vietnam? Answering this question tells Mr. Lee and Dr. Tan who the potential customers are for the VIH.

Secondly and requiring much more work is a thorough methodology to ascertain the unmet needs of both expats and wealthy Vietnamese to determine which market they will initially target, and which one they will not go after, ever. This primary research needed to have a very thorough methodology to capture what services each audience wanted and what they were willing to pay for them. The bundling of services for each audience is quite distinct and very different, as is the pricing strategies for each. None of this was known when the VIH was created, and this is large part why the intensive and commendable efforts around sales are still not delivering results. What VIH is selling isn't resonating with either segment (wealthy Vietnamese or expats) as they weren't ask for what they… READ MORE

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