Chapter 14Achieving Competitive

Advantage:The Case for Strategy

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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

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Purpose and Overview

• Overview– The Concept of Strategy – Strategy Analysis Frame – Sources of Competitive Advantage – Power Strategies

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The Concept of Strategy

• Competitive Strategies– Define actions – Identify assumptions and interpretations

organizations make– Identify accomplishments– Identify the plans of rivals

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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

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The Concept of Strategy

• A definition of strategy– Concepts and ideas to achieve and sustain

competitive advantage over rivals

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The Concept of Strategy

• Conceptual Components– Strategies are mostly conceptual– Competitive advantage is dynamic

• Must be achieved and sustained

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The Concept of Strategy

• Conceptual Components– Actions and proprietary decisions made

during “strategy retreats” – Reflections of “business models” to obtain

advantage

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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

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Strategy Analysis Frame

• Two Structural Views– Resource-based

• Capabilities sustain competitive advantage • Emphasizes sustainability

– Importance to health care organizations • Quality• Complexity• Technology

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Strategy Analysis Frame

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Sources of Competitive Advantage

• Gaining and sustaining advantage is the end of strategy

• Various sources of advantage are its means

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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

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Sources of Competitive Advantage

• Pace– Four strategic orientations

• Prospector • Analyzer • Defender • Reactor

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Sources of Competitive Advantage

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Sources of Competitive Advantage

• Potential– Focus: Resources that give advantage – Strategically important characteristics of

resources: • Transferability• Competitive superiority• Inimitability• Substitutability• Durability

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Sources of Competitive Advantage

• Potential– An internal source of advantage– Produces advantage indirectly by enhancing

other sources of advantage

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Sources of Competitive Advantage

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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

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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

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Sources of Competitive Advantage

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Sources of Competitive Advantage

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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

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Power Strategies

• Power Strategies – Absolute vs. Relative– Absolute power

• Resources used in competitive battle– Relative power

• Advantages from resources within individual markets

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Power Strategies

• Four Major Power Strategies– Same businesses

• Horizontal expansion– Different businesses

• Different businesses• Vertical integration• Horizontal integration• Portfolio

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Power Strategies

• Further thoughts on Horizontal Expansion Models– Company-level or local-level strategy

• Two key dimensions– Size – Pattern of spatial dispersion