1. Chapter 14 Achieving Competitive Advantage: The Case for Strategy

2. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 2 Purpose and Overview Purpose –To understand the concept of strategy applied to health care organizations –To develop a framework to analyze strategy –To explore five major advantages that form the basis for competitive strategies

3. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 3 Purpose and Overview Overview –The Concept of Strategy –Strategy Analysis Frame –Sources of Competitive Advantage –Power Strategies

4. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 4 The Concept of Strategy Competitive Strategies –Define actions –Identify assumptions and interpretations organizations make –Identify accomplishments –Identify the plans of rivals

5. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 5 The Concept of Strategy Competitive Strategies –Conceived in context of competitive combat –Responds to threats and opportunities –Creates advantage over what might have been attained by its rivals

6. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 6 The Concept of Strategy A definition of strategy –Concepts and ideas to achieve and sustain competitive advantage over rivals

7. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 7 The Concept of Strategy Conceptual Components –Strategies are mostly conceptual –Competitive advantage is dynamic Must be achieved and sustained

8. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 8 The Concept of Strategy Conceptual Components –Actions and proprietary decisions made during “strategy retreats” –Reflections of “business models” to obtain advantage

9. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 9 Strategy Analysis Frame Two Structural Views –Market Structure Influences the strategies of competitors –Competitor conduct Actions organizations take collectively in response to environmental and market stimuli

10. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 10 Strategy Analysis Frame Two Structural Views –Resource-based Capabilities sustain competitive advantage Emphasizes sustainability –Importance to health care organizations Quality Complexity Technology

11. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 11 Strategy Analysis Frame

12. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 12 Sources of Competitive Advantage Gaining and sustaining advantage is the end of strategy Various sources of advantage are its means

13. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 13 Sources of Competitive Advantage Pace –Focus: timing and intensity of strategic action –Early-moving organizations gain advantages over late movers Achieving efficiencies earlier to invest in new businesses and management capabilities

14. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 14 Sources of Competitive Advantage Pace –Four strategic orientations Prospector Analyzer Defender Reactor

15. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 15 Sources of Competitive Advantage

16. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 16 Sources of Competitive Advantage Potential –Focus: Resources that give advantage –Strategically important characteristics of resources: Transferability Competitive superiority Inimitability Substitutability Durability

17. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 17 Sources of Competitive Advantage Potential –An internal source of advantage –Produces advantage indirectly by enhancing other sources of advantage

18. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 18 Sources of Competitive Advantage

19. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 19 Sources of Competitive Advantage Performance –Focus: Superior operations and strategies Efficiency/effectiveness of operations –An internal source of advantage –Produces advantage indirectly by enhancing other sources of advantage

20. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 20 Sources of Competitive Advantage Position –Focus: Projection of valued images to consumers –Three common strategies: Low cost High differentiation Distinctive niche –External source of advantage

21. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 21 Sources of Competitive Advantage

22. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 22 Sources of Competitive Advantage

23. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 23 Sources of Competitive Advantage Power –Focus: Effective use of organizational mass –Advantages: Economies of size Economies of synergies when business units align into larger organizations –External source of advantage

24. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 24 Power Strategies Power Strategies – Absolute vs. Relative –Absolute power Resources used in competitive battle –Relative power Advantages from resources within individual markets

25. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 25 Power Strategies Four Major Power Strategies –Same businesses Horizontal expansion –Different businesses Different businesses Vertical integration Horizontal integration Portfolio

26. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 26 Power Strategies Further thoughts on Horizontal Expansion Models –Company-level or local-level strategy Two key dimensions –Size –Pattern of spatial dispersion