The objective of this report is to evaluate the key concepts of strategic management in the context of a given organisation. All these practices will assist in analyzing available strategic directions for firm by considering:
- Provide a description about strategic management concept/model.
- Critically evaluate the effectiveness of the model in Melbourne Private hospital.
- Identify the concept of strategic management in Melbourne Private hospital.
- Introduce a real-life case study and provide an application of strategic management model in it.
Strategic management is a major part in each and every business or organisation as it support in developing effective strategies for the business and achieve their goals or targets for business purpose. The strategic management provide the overall business direction in specifying the objective of healthcare industry. These strategies are designing different planning, policies and new idea for growth and development. The Porter's Five Forces Model can be used to analyse the competition level of business and its functionality. These model is described the decision making at the time of business operations. In this report, the history of Porter's model and it is development will be discussed. Section 1 will discuss how the five Porter's forces affecting organizations and where the model is applicable in organization. Specifically, in which it is observed very tough for new competitor to increase their business in existing marketplace. In this way, the entry barriers can be low and face so many new threats (Bryce, 2017).
Porter's Five Models
The Five Porters force is very important for development of business it identifies the actual profitability of company for long period and can analyse the actual requirement of company (Alkhafaji and Nelson, 2013). This model is useful for planning new strategies for development. This model is used for long term strategies that is helpful for business or organisation. It will simply understand as the tool of business strategy and it helps in analyse the economic condition in this industry. It also identifies company's role and their profitability within a market. These forces affects the competitive position of a company in the business environment at global level. These forces are giving a new idea for business development and it will analyse the structure of business operations.
There are five types of forces applicable on business activities
Threat of New Entrants-Within the healthcare sector, initially some companies invest money for research and develop a new department such as drug medicine. As a result, such companies should be dealing with new policy's formulation. They should follow some rules and regulations for growth and development as new competitors who are coming in market and then they have their own capabilities to gain profit and try to increase their business in all over the world. Sometimes, it is very difficult to create profit in marketplace and immediately earn lot of money because there are already many competitors are available.
Different barriers that should be taken into consideration for any new competitors entering the market:
Scale of economy, requirement of capital income, product identification, size of company, government rules and regulation as this is very important part of business that provide benefits to company (Rahm and Riha, 2012). This industry is not only focusing on the existing market but is applicable for new industries. Peoples will attract to the new organization and it can influence the company to change the pattern of business process.
Bargaining Power of Suppliers-the bargaining power of supplier is very high as healthcare industry depends on their suppliers to provide essential supplies such as medical devices and drugs. The Healthcare organizations have high bargaining power because it has specialist doctors to build their working system in a proper manner. This factor is directly affected to the cost of goods and services. In this way, the cost of product is increasing in market on the other hand companies are reducing their product quality. This will minimize their services and the supplier will change their strategy and provide the best quality of services. Supplier will change the product according to customer requirement (Eden and Ackermann, 2013). Most of the companies are depending on the suppliers because they are dominating their company and increasing their cost of resources supplied by them. Supplier will not sell the same product in market and effective competitors are against the other party. It can provide the best raw material and then provided an effective quality of product. It can maintain the relationship between the customer and supplier. The strong supplier are increasing their product cost and affecting the sales value in market. Buyer has power to negotiate with the customer and it provides the best services to customer.
Bargaining Power of Buyers- The private Healthcare aim to provide the best services to people with more benefits to customers. Customers are attracted to the lower price for products and services while the buyer take advantages to earn a lot of profit. Buyer can be attracted by a good position in market while the supplier is dependent on buyer (Foss and Knudsen, eds., 2013). The price of product is less in market so that the customer will pay less money because they are only focusing on a single vendor. It is very powerful scheme to increasing their demand and taking so many advantages. Buyer has skill to negotiate their price so that customer will easily purchase in very efficient ways. Buyer can be earning profit and they are supply an effective product in market and in this way, it determines that supplier will earn a lot of profit.
Threat of Substitutes- The organizations is more affected from the substitutes when the drug is expired. This hospital provides the opportunity in making new drugs, it is that when the product is available in market and customers are directly purchasing it from industry because the rate is cheaper and they offer more benefits for the consumer. As a result of this, the threat of substitutes are very high and they earn less profit in market because they are increasing the price of product. They offer attractive products and services at a lower cost. They can affect the competition level of industry; it can be directly affecting their profitability because the customers are purchasing the product in industry. The substitutes are affecting the organization’s ability to fix the price for product.
Rivalry among existing competitor- In this factor, the high rivalry can affect the competitive environment and it will be a major challenge for old firms who were established previously. There is a major challenge to increase their profits when it faces so many challenges in market and the growth of business is also low. Rivalry can damage the market share value of that firm. It can affect the company through increasing their innovation ideas, increasing digital marketing, improving their product quality etc. (Frynas and Mellahi, 2015). The monopoly create company's different structure to earning a more profit in this way, it increases the competition level of old company.
There are many firms under this industry and it can be increasing their competition level that is helpful for the customer and product resources. In this way, the company are fast growing so that they earn lot of profit in market and it is increasing the rate of production in which it will expand their business in all over the world. On the other hand, the organization is growing slowly and then it can earn minimum profit in market. Nowadays, the competition level is high due to many entrants within healthcare industry. In industries, they are fixed amount of every company is high.
According to Gammenthaler and Lehmann, (2018) this theory is important for analysing the whole business requirement effectively and efficiently. There is no limit to analyse and generating a different value in market. Nowadays, the five forces are outdated and other tools are helpful for development (like what??). Five forces are designed for business purpose but currently, most of the businesses are using the digital technology for solving problems and issues (again like what). One could say that as the five forces were designed in 1980 and were more applicable for business at that time but currently it is not considered a successful tool due to Globalization, digitalization, deregulation etc (Nouriand Soltani, 2017).
2. Present History of Porters’ Forces:
These Five forces are developed by Michael A. Porter in 1979. This model would be used for the business planning It will manage the whole external factor of organization. These forces are very challenging for Michael A (Godoy and Naidich, 2012). Porter’s forces analyse competitors, buyers, and supplier in which they are interacted to each other.
These main innovative ideas came from five forces that would be provided by Andrew Grove, the CEO of Intel organization. In 1993, these five forces are developed