Communication in the Planning Process
If the movement towards Consumer-Driven Health Care continues to advance, health care organizations will definitely want to improve the way its business operations. The organizations will seek more effective ways of communicating to the market. Effective communication through modern technology with clients ensures timely and effective delivery or services (Weaver & Weston, 2007). Moreover, it ensures that health care organizations are able to respond to upcoming challenges from a business and medical perspective of a diverse population. Effective communication also means that consumers are given easy access to health care information in cost treatment and quality and are therefore empowered to make informed choices on health care purchasing behavior.
The health care organizations will also need to establish more collaborative ways with health insurance schemes to ensure that they are able to offer health care services to a more economically diverse population. These developments will increase access to health care to those who are already underserved in the market.
Porter's Five Forces Model
The Porter’s Five Forces is a framework that provides a simple perspective used to assess and analyze the competitive strength and position of a business organization. These forces are; existing competitive rivalry between suppliers, power of suppliers, threat of substitute products, bargaining power of buyers and the threat of new market entrants (Roy, 2009). Porter tries to explain that any business planning to increase its profitability or acquire better leverage in its industry, must consider the effects these five forces have on that business or organization.
In the health care industry, these forces are significant though some have more effects on industry profits than others. When the competition between suppliers intensifies there is a reduction in the cost of medical supplies resulting in higher industry profits. On the other hand when suppliers set standardized prices for medical supplies the industry profits become dependent on the quality of services that healthcare organizations offer to their customers. The threat of substitute products and the entry of new healthcare organizations increase competition thereby compelling other organizations to lower the cost of their services. This reduces the profitability of the industry.
Effective communication is integral in ensuring that healthcare organizations reap maximum profits from the Porter’s Five Forces. Open and responsive communication between healthcare organizations and their suppliers, among their umbrella bodies and the customers mitigates to a significant extent against the detrimental effects of the Porter’s Five Forces.
There are four fundamental ways businesses can grow their profits and revenues. The first one is selling more units to existing customers. The second one is selling new units to new customers. The third is selling the same units to the same customers but at higher costs. The fourth one is selling the same units but reduce their cost of production (Wilson & Bates, 2003). All other factors remaining constant, each of these fundamental ways results in a direct increment in the amount of revenues and profits that businesses acquire.
Growth and expansion strategies are crucial to any business that targets to survive increasing competition in its field of operation. The five generic types of growth strategy that are available to individual Strategic Business Units (SBUs) are: Horizontal integration, vertical integration, product diversification, market diversification and intensification (Wilson & Bates, 2003). Horizontal integration involves having the company join another company at the same level in the production chain. Vertical integration involves a company joining another company or companies that are either at either a lower or higher level in the production chain (Wilson & Bates, 2003).
In order to monitor the above strategies, program executives in healthcare organizations need a matrix that helps them understand the position of their organization in the market. The Porter’s Five-Forces Model is a suitable matrix that can help a manager in health care organization to evaluate the competitive environment and come up with the most suitable strategy to weather challenges in the prevailing environment. In this regard, effective communication with all stakeholders underpins the success of this metric in executing the desired strategies.
Purposes of a professional strategic financial management function in a healthcare organization.
There are four primary purposes of a professional strategic financial management function in an organization. The first one is setting prices for the goods or services that the organization provides. The second is recording and analyzing all financial information ant the departmental and organizational levels (Wilson & Bates, 2003). The third purpose is undertaken by a third party and involves producing and analyzing of discounts (contractual allowances). The fourth is to prepare and report the financial projections that would successfully guide the organization in future plans.
There are various factors that can affect these purposes. One of these is reimbursements. The ability of an employee to receive his/her reimbursement may be significantly influenced by the prevailing economic conditions. The decision to borrow may be affected by the amount and timing of reimbursements (Weaver & Weston, 2007). When preparing and reporting financial projections it is imperative for planners to consider employer reimbursements in order to increase the accuracy of financial projections.
Supply and demand also affects the purposes of professional strategic management. It is useful in explaining how prices control the demand of goods and services in this case healthcare services. Contractual adjustment can also affect financial decisions especially when determining the overall net service revenue that has been generated by an organization (Weaver & Weston, 2007). An analysis of the patient mix also helps to determine the total revenue that is obtained from both insured and uninsured patients. A healthy working relationship between healthcare organizations and the regulators is also an important consideration of the above purposes. Organizational adherence to legislations could be the key to successful achievement of all the plans and strategies.
Strategic resources and competencies
Strategic resources in a health care organization include human resources, relevant skills, physical assets (computers, offices, vehicles, laboratories, buildings), money, and technology. Strategic competencies are the unique skills and technologies that create a distinct customer value. In health care these competencies include excellent patient-physician relationships and timeliness in delivery of services. Moreover, effective communication between patients and the healthcare management gives the organization competitive advantage.
Effective communication among stakeholders underpins success in organizations. This is especially so for Consumer – Driven Health Care where healthcare organizations have to handle a population that is economically diverse. Healthcare organizations could use the Porter’s five forces analysis to gain competitive advantage in their industry. Among other things, this model considers threats from new entrants and substitutes. Communication between organizations and their stakeholders helps mitigate against the negative effects of these forces such as declining profitability. In a bid to achieve growth, healthcare organizations can rely on the four fundamental ways of growing businesses such as reducing the cost of production or selling more units. Moreover, they could apply the five generic types of growth strategies such as integrations with other companies. In this regard, a matrix such the Porters Five Forces serves as a sound basis to evaluate the competitive environment of a given healthcare organization. Additionally, there are the four purposes of professional strategic financial management which seek to ensure a healthy financial backing for an organization as it embarks on implementing its growth strategies. In this regard, reimbursements, supply and demand, contractual adjustments, patient mix and legislations affect those purposes differently. Strategic resources include human resources, physical assets among others while competencies include timeliness and beneficial patient-physician relationships. Strategic resources and competencies though different conjure to give organizations competitive advantage by utilizing unique skills and technology in the organization.
Roy, D. (2009). Strategic foresight and Porter's five forces: Towards a synthesis. München: GRIN.
Weaver, S. C., & Weston, J. F. (2007). Strategic financial management. Boulevard: Cengage Learning.
Wilson P. & Bates S. (2003). The Essentials to Managing Small Business Growth. USA. John Wiley & Son Publishers