Health Administration Press Strategic Analysis for Healthcare Chapter 25 Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Strategy Selection • To begin the process of strategy selection, the analyst reviews the potential strategies identified in the Ansoff and TOWS matrices. • Many strategists place each possible strategy on a separate sticky note, so the strategies can be sorted and moved around into clusters. • The strategist searches for commonalities among the strategies. • Most likely, about 25 strategies can be grouped under four or five main headings. • The strategist identifies those main headings and places the appropriate strategies under each. • The main headings become “overarching strategies,” and the specific strategies from the Ansoff and TOWS matrices become “supporting strategies” or “substrategies.” Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Strategy Selection • In a strategy consolidation from the Ansoff and TOWS matrices, “Expand into adjacent counties,” “Expand into urgent care,” “Place satellite locations,” “Open cancer center,” and “Buy out private practices” could all be grouped together. • A title of “Facility Expansion” could be placed above these strategies, and that could become an overarching strategy. • Likewise, many Ansoff and TOWS example strategies could be consolidated under other overarching strategies, such as “Service Expansion,” for instance. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Strategy Selection • Pursuing every good strategy is not recommended. • An organization likely will not have sufficient funds to pursue every option, and doing so would lead to a lack of focus. • The strategic options need to be culled and the most promising ones retained. • After the strategies have been consolidated, the analyst can evaluate the strategies at two levels. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Strategy Selection • First, the overarching strategies can be compared against one another. • For example, the facility expansion strategy would be compared with service expansion. • At the second level, the substrategies under an overarching strategy can be evaluated and then either retained or discarded. • In the facility expansion example, the analyst would decide whether to retain or discard “Expand into adjacent counties,” “Expand into urgent care,” “Place satellite locations,” “Open cancer center,” and “Buy out private practices.” Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Strategic Fit Assessment and the QSPM • To choose among the overarching strategies, the strategist constructs a quantitative strategic planning matrix (QSPM). • This matrix assesses each overarching strategy based on how attractive it is relative to the external factor evaluation (EFE) and internal factor evaluation (IFE) factors (see Chapters 10 and 18). • This assessment produces an attractiveness score (AS) and a total attractiveness score (TAS) for each strategy. • The strategy with the highest total attractiveness score is the strategy considered most appropriate for implementation. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press QSPM • To create the QSPM, place the external opportunities and threats from the EFE analysis and the internal strengths and weaknesses from the IFE analysis into the left column of the matrix. • Make sure you list at least ten external factors and ten internal factors. Include the weight from the IFE and EFE with each item. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press QSPM • The attractiveness score in the QSPM indicates whether each IFE/EFE factor is important to, has a significant impact on, or produces an “attractive” match with each strategy. • The scores are determined by analyzing each IFE/EFE factor and considering whether the factor makes a difference in the decision of which strategy to pursue. • If the factor does not make a difference, the attractiveness score is zero. • If the factor does make a difference, the strategy is rated relative to that factor. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press QSPM • The rating scale, from 0 to 4, is as follows: 1 = not attractive 2 = somewhat attractive 3 = reasonably attractive 4 = highly attractive 0 = not applicable • The strategist assigns the attractiveness score based upon everything known about the organization and its competitive environment. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press QSPM • As an example on the next slide, the overarching strategy of facility expansion is compared to service expansion. • The weight multiplied by the attractiveness score assigned by the strategist yields the total attractiveness score. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press QSPM Opportunities 1 Expansion of Existing Services 2 Additional Locations 3 Greater Exposure and Branding 4 Addition of Trauma Center Weight 0.050 0.100 0.050 0.025 Total Attractiveness Score Attractiveness Score Service Expansion Total Attractiveness Score Opportunities Attractiveness Score Weight Facility Expansion 3 0.150 4 0.200 4 0.400 4 0.400 4 0.200 3 0.150 4 0.100 4 0.100 Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press QSPM • The entire IFE and EFE, containing all of the strengths, weaknesses, opportunities, and threats and their corresponding weights, is used. • Each item is issued an attractiveness score. • The attractiveness score is multiplied by the weight to arrive at a total attractiveness score. • The entire total attractiveness score column is summed for each strategy individually. • The strategy with the highest TAS is the strategy that is quantitatively most attractive and thus selected. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Assessing the Supporting Strategies • The supporting strategies within the overarching strategy can be assessed next. • Not all the supporting strategies will be appropriate, and some may be mutually exclusive. • Many strategists run a QSPM again on the supporting strategies and retain those with the highest scores. • Other analysts use research and intuition to determine which ones stay and which go. • The cost of implementing one supporting strategy might affect how many other strategies the company can afford to take on. • At the same time, multiple supporting strategies might be necessary for successful completion of the overarching strategy. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Consistency Check • Once strategies have been selected, they should be checked for consistency with the directional matrices discussed in previous chapters. • If the grand strategy matrix, SPACE matrix, and internal–external (I/E) matrix suggest a conservative strategy and the strategist has chosen an aggressive overarching strategy with aggressive supporting strategies, then something is wrong. • The inputs and decision making may need to be reconsidered. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Strategic Analysis for Healthcare Chapter 26 Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Financial Fit Assessment and Projection • In strategy selection, the financial investment required to support implementation is a significant criterion, as is the amount of time needed to recoup the investment and profit potential. • The QSPM model might show one proposal to be superior to the others in a strategic sense; however, the organization might not have the financial resources to successfully implement and maintain that strategy. • To address concerns of this nature, the strategist must apply a financial screen to the proposed strategies. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Financial Fit Assessment and Projection • In a survey of 1,139 executives by McKinsey & Company, 75 percent said companies that get the best results use a balanced mix of financial and strategic targets; only 11 percent disagreed. • The point behind these findings is that a strategic fit is not enough. One needs both a strategic fit and a financial fit. • A complete financial analysis, using factors such as depreciation, tax effect, and so on, is beyond the scope of this book. However, this chapter introduces several important financial analysis measures, including net present value, internal rate of return, profitability index, payback period, and probability of success. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Net Present Value • The net present value (NPV) of a future stream of income recognizes that the future income is worth less in today’s dollars than a simple arithmetic sum of the same dollars would indicate. • The basic idea behind this concept is that a dollar in hand today is worth more than the promise of a dollar five years from now. • The promise five years from now will be eaten away by inflation, which lessens the dollar’s purchasing power. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Net Present Value • The next slide demonstrates a calculation for net present value using Microsoft Excel. • To begin, set up a chart showing the annual cost of capital or discount rate, followed by each yearly income. • You can then use Excel’s “=NPV” function to calculate the net present value. • Use the discount rate as “rate,” and highlight the cells with the initial cost and yearly incomes to finish the equation. • In the example shown in the exhibit, the total return less the up-front investment is $4,000,000; however, the net present value is only $1,188,443 due to the time value of money. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Net Present Value Data Description 10% Annual discount rate $(10,000,000) Initial cost of investment one year from today $3,000,000 Return (less costs) from first year $4,200,000 Return (less costs) from second year $6,800,000 Return (less costs) from third year $4,000,000 Total return $1,188,443 NPV Excel syntax: NPV(rate,value1,value2, ...) Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Internal Rate of Return • The internal rate of return (IRR) determines the percent return on an investment considering an initial start-up expenditure followed by an annual income stream. • The measure enables a strategist to compare one strategy to another to determine which has the highest percent return. • Some companies use the discount rate for comparison with the IRR. • However, most companies have a discreet decision criteria threshold such as, “Any project investment must have an IRR of 10 percent or greater, or we will not pursue it.” Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Internal Rate of Return • The next slide shows a Microsoft Excel calculation of internal rate of return. • Using the same chart you used for calculating the NPV, select Excel’s “=IRR” function and then highlight the cell with the initial cost plus the cells with the yearly incomes to finish the equation. • Excel allows a space in the syntax for “guess,” but we recommend that you leave this field blank, in which case Excel will automatically assume 10 percent. • In the example shown in the exhibit, the total income less the up-front investment is $4,000,000, and the internal rate of return is 16 percent. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Internal Rate of Return Data Description 10% Annual discount rate $(10,000,000) Initial cost of investment one year from today $3,000,000 Return (less costs) from first year $4,200,000 Return (less costs) from second year $6,800,000 Return (less costs) from third year $4,000,000 Total return 16% IRR Excel syntax: IRR(value1,value2, ..., Guess) Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Profitability Index • The profitability index (PI) is similar to the internal rate of return, but it is calculated differently and gives a slightly different percent return. • The PI provides information on your strategic investment opportunity, as well as a decision rule by which you can accept or reject an investment. • The PI tells you what your return will be for every dollar invested in a strategic initiative (e.g., for every $1 invested you will return $1.29). • The PI also suggests that a project with a PI score of less than 1 should be rejected as an insufficient return, whereas a project with a PI score of 1 or greater should be considered for investment. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Profitability Index Data Description 10% Annual discount rate $(10,000,000) Initial cost of investment one year from today $3,000,000 Return (less costs) from first year $4,200,000 Return (less costs) from second year $6,800,000 Return (less costs) from third year $4,000,000 Total return $1,188,443 NPV 1.12 PI Formula: (NPV + startup costs) / start-up costs ($1,188,443 + $10,000,000) / $10,000,000 Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Payback Period • The payback period (PP) answers the question, “If I make the required investment in this strategy, how long will it take to recoup my investment?” • This period can be expressed in the number of months or number of years. • In the previous example, the payback period is approximately 30 months to recoup the initial $10,000,000 invested (excluding the time value of money). Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Probability of Success • Potential strategies will each have different likelihoods of success, and a strategy’s profit potential should be discounted by the probability of achieving it. • You can estimate the probability of success based on research and intuition, and then multiply the probability by the NPV. • This calculation enables you to compare across potential strategies that have different NPVs and different probabilities of success, to level the comparison playing field. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Putting It All Together • Lining up the various calculations in a single display, as shown on the next slide, allows you and your viewer to quickly see the values and thus more easily compare competing strategies to find the best financial fit with your organization. • Keep in mind that a strategy with a good financial fit might not be a good strategic fit; likewise, a strategy with a great strategic fit might not make the most financial sense. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Putting It All Together NPV IRR PI PP Prob Prob*NPV Choice Strategy A $28.1M 15.1% 1.2 7.1yrs 91% $26.133M 1st Strategy B $30.7M 16.3% 1.3 7.5yrs 85% $24.867M 2nd Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Running Head: BENCHMARK ANALYSIS LP3 Assignment: Benchmark - A Starting Point December 21, 2018 GlaxoSmithKline, an international pharmaceutical giant, is the organization under analysis. It provides a wide variety of products and services, which include; oral healthcare 1 BENCHMARK ANALYSIS 2 (through the production of toothpaste), treatment of diseases (through the manufacture of medicines), nutritional care (through the manufacture of food supplements and vitamins). The factors affecting this organization are; Political factor: The production, distribution, and use of numerous pharmaceutical products are subject to governmental regulations, like the Drug Act. The local government and foreign regulations also manage the business. The international market is subdued to political stability. The more stable the political background of the country or the region in which the system is based, the more the users of the drugs are (Bryan, 2002). Economic factor: The products of GlaxoSmithKline are influenced by the raw materials being used in the drugs. The fuel costs influence all dissemination. Operations in foreign markets involve the study of unpredictable foreign exchange rate changes. The economic repercussions of these movements are severe because these affect the growth. Manufacture is also subjected to business cycles, energy availability, money supply, etc. An organization as big as this enjoys huge economies of scale and thus high profits. Social factor: Lifestyle has an immense influence on the use of GlaxoSmithKline products such as toothpaste and supplements, and their advertisements are tailored accordingly. Establishment of these products in the foreign market needs an in-depth understanding of the local social structure. The better the understanding of the said local-social structure would provide the much-needed knowledge and familiarity of the targeted population, and thus a much more effective distribution system would be put in place (Tew, 2002). Technological factor: GlaxoSmithKline's productions are prompted by the modern production techniques applicable to their business divisions of medicines, food supplements, etc. BENCHMARK ANALYSIS 3 It has to focus on the latest delivery techniques and other technical advances in their field. A sophisticated technical system would mean better production and distribution of the products, and thus a broader population can benefit from the products. References BENCHMARK ANALYSIS 4 Bryan, R. (February 01, 2002). A PEST analysis of the role of clinical governance in hospital infection control. Journal of Infection Prevention, 3, 1, 22-25. Tew, L., Morgan, Perry, C., S., Hughes, J., Mulhall, A., Fry, C., Pratt, R., &. (October 01, 2002). Healthcare governance and the modernization of the NHS: infection prevention and control. British Journal of Infection Control, 3, 5, 16-2 Running Head: PEST IN HEALTHCARE 1 Pest in Healthcare Student’s Name Institution Date PEST IN HEALTHCARE PEST Factor Issue 2 Impact on Implication or strategy Organization POLITICAL Impact on the control of tax legislation Governmental expenditure on healthcare FACTOR the organization and its changes, insurance can be influenced by tax policy changes. It performance, and mandates, and can be a merit, giving room to more consumer capability of consumer subsidies. Or it could be the reason for expenditure. protection, worry. These changes can influence the healthcare and the public services they are eligible for, especially with fluctuating healthcare plans and bills. ECONOMIC The short and long-term Many economic Fluctuations show how people are able and FACTOR state of the business, the factors, especially willing to utilize their money, impacting financial resources interest rates, policy spending. Organizations that offer accessible within the unemployment, and medical services won’t have many persons economy and nature of the inflation (Leeds capable of paying these rates if the competition confronted by Metropolitan unemployment rate escalates. the organization University, 2010). SOCIAL Trends in the way people some communities If a healthcare provider is not conscious of FACTOR think, work, and live can share cultural these conditions while they care for the demographic changes norms, fears, and people, it can give rise to problems. Medical beliefs professionals thus need to be up to date with new trends (Martin, 2018). TECHNOLOGICAL Attaining advantage over Advancements can Advancements with medical devices allow FACTOR the market. create new patients to acquire better and quality care. industries, and also Transformations in-app developments allow allocate valuable patients to receive care faster than ever input to before. manufacturing and service industries. References Leeds Metropolitan University. (2010). PESTEL analysis. Martin, B. C. P. D. M. B. A. (2018). Strategic Planning in Healthcare: An Introduction for Health Professionals. New York: Springer Publishing Company. Running head: BUSINESS STRATEGY 1 Introduction to Business Strategy December 07, 2018 Organization managers are expected to run organizations in a formally structures way, in a well-managed organization, the leadership of the firm plays a big role in making sure that the BUSINESS STRATEGY 2 organization attains the set goals. The goals can either be short-term or long-term goals. Through strategic planning leaders in an organization can foster business to its journey towards success. The process of strategic planning involves an outline procedure that an organization uses to achieve the set goals with proper utilization of its assets and the accessibility it has on the underlying market. To effectively accomplish a set goal, it is essential for firms to consider the present position and set possible routes which they can take to achieve the intended goal (Wheelen, 2017). The basic concept behind making the vital arrangements to the plan is by the understanding of the concept of effective delivery of services and how to exceed the expectations from the intended goals. Through this organization are expected to formulate a well-structured and comprehensive vision and mission statements, the organization’s values and further the work plan. In any organization, the observations and visions are the primary aspects that help them on how they run their organization. It helps organizations to know how to work when targeting on a certain goal. For instance, in this case, the Christina care Health care system is a nonprofitable organization needs a framework upgrade that places more attention to the patients rather than to the organization's profitability. The organization seeks to offer a special service to the patients. By doing so, it seeks to create a powerful market base and minds essentially on better health care results and at a lower cost that meets the demands of the market. The consequential results of this initiative are to create a patient-friendly program that can be conveyed all through the country. The medical facility has been known to have a long history of educative incredibleness and a long history of research achievements. The organization has an incredible amount of scholarly works in the names 300 of its staff members in the University of Thomas Jefferson University. BUSINESS STRATEGY 3 The organization also has an addition of 50 workforce members undertaking undergraduate courses in medical fields. Christina ‘s care has a long-lived dedication to safety and rich history of its excellence in medical service provision. The organization also has community initiatives to support the communities within its accessibility. It is estimated that more than 70,000 patients visit the hospital each year, the high number of patients is because of the hospital policy which focusses more on the wellness of the patients than the pay they have to offers for services. Through this aspect, they have been able to engage in programs that aim for the betterment of the quality of life and awareness on the medical conditions. The organization aims to double the number of patients visiting the organization by 2022 (Christiana Care Health System (n.d.). This is through their expansion strategies aimed at increasing the hospital's capacity and facilities. This would make the organization rise from the current 22nd place nationally to a spot within the best facilities nationally. From the overview of the organization, the possible mission statement of the firm would be based on its key characteristics. Mission statement Christina care Health care system is a non- profit health care organization committed to healthcare service delivery to communities through; -Leadership and excellence in the delivery of quality healthcare services at affordable rates. -Expanding the heights of biomedical knowledge through research. -Improving healthcare status in the community through awareness of diseases and ways of disease prevention. -Enhancing access to medical care through the expansion of medical access to underserved citizens. BUSINESS STRATEGY 4 Quality patient care is our focus. Providing excellent and quality medical service, support information in the health sector through research and proper medical education are an essential aspect of our mission. The mission was founded on ethical and cultural perspectives of the Declaration of the independence which inspires happiness to all American citizens. Vision To be the best healthcare firm while building its place as a leader and being the most admired, respected, as well as reliable healthcare organizations. Core Values In pursuit of the vision, the organization through its leadership and staff, the following values directs them. • Excellence • Teamwork • Compassion • Innovation • Stewardship • Diversity References BUSINESS STRATEGY 5 About Us – Christiana Care Health System. (n.d.). Retrieved from https://christianacare.org/about/ Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management and business policy. Pearson. 
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