importance of understanding organizational differences

1. Discuss the resource-based view of competitive advantage. Why is
   it important to understand organizational differences to use this
   approach?
2. Briefly define what is meant by competitive advantage. Are
   competitive advantage and sustained competitive advantage identical
   concepts? Compare and contrast the two concepts.

Professional Development: 

Case Study #12: AIDSCAP Nepal

• Conduct an internal environmental analysis, identifying the
  value-creating strengths and weaknesses for each value chain component.
  Model your response after Exhibit 4-4 (p. 144) “Value Creating Strengths
  and Value Reducing Weaknesses.”
• For each strength, assess the competitive relevance, using Exhibit 4-6 (p. 149) as an example.
• Exhibit 4–4: Value Creating Strengths and Value Reducing Weaknesses for American Healthways, Inc.
• Value Chain Component
• Service Delivery, Pre-Service
• Service Delivery, Point-ofService
• Service Delivery, AfterService
• Support Activities, Culture
• Support Activities, Strategic Resources
• Value Reducing Weakness
• • Limited brand identity • Disease management and care enhancement
  contracts require extensive selling because of lack of knowledge of key
  benefits • Revenues subject to seasonal pressures from enrollment
  processes of contracted health plans
• • Company/employees have less experience in care enhancement
  programs in expanded product line areas such as end-state renal disease,
  fibromyalgia, etc. • A majority of company’s revenues accounted for by
  three health plans
• • Incomplete or inaccurate data could render independent evaluation of clinical interventions useless
• • Acquisition of StatusOne Health System with different culture •
  Company’s reluctance to declare cash dividend may discourage some
  classes of investors
• • Hospital contracts decreasing • Cost to maintain IT for
  compliance with federal and state regulations • High labor costs from
  competition for staff • Volatility of stock price and trading volume
• Value Creating Strength
• • Customer benefit: care enhancement/disease management concept
  (attractive to health plans, hospitals, physicians, patients) • Customer
  benefit developed: geographical coverage (attractive to large health
  plans) • Six care enhancement centers
• • Successful management of diseases leading to reduced costs and
  increased customer satisfaction • Company employees highly experienced
  in implementing care enhancement programs in certain areas, such as
  diabetes • Integrated care product line attracts broad range of patients
  • Number of covered lives increasing making economies of scale possible
• • Alliance with Johns Hopkins Health System to independently evaluate effectiveness of clinical interventions
• • First disease management and care enhancement provider in nation
  accredited by all three accrediting agencies • Highly professionalized
  culture • Experienced management team of individuals with extensive
  health care experience and longevity with the company • Conservative
  fiscal management philosophy: retain earnings for future growth and
  development • Company has state-of-the-art medical information
  technology • Company has sound financial position: cash, working capital,
  stockholder equity increasing over past year • Earnings per share of
  common stock has increased despite 3:2 stock split in 2001 and 2:1 stock
  split in 2003.

Exhibit 4–6: Strategic Thinking Map of Competitive Advantages Relative to Strengths in General

Is the Value of the Strength High or Low? (High/Low?)

H

H

H

H

H

H

H

H

Is the Strength Rare? (Yes/No)

N

N

N

N

Y

Y

Y

Y

Is the Strength Easy or Difficult to Imitate? (Easy/Difficult)

E

E

D

D

E

E

D

D

Can the Strength Be Sustained? (Yes/No)

Y

N

Y

N

Y

N

Y

N

Implications

No competitive advantage. Most competitors have the strength and
those that do not can develop it easily. All can sustain it. Maintenance
strategy.

No competitive advantage. All competitors have the strength which is
easy to develop. Strength is not sustainable so it represents only a
short-term advantage.

No competitive advantage. Many competitors possess the strength but
it is difficult to develop, so care should be taken to maintain this
strength.

No competitive advantage. Many competitors possess the strength but
it is difficult to develop, and those who do possess it will not be able
to sustain the strength. Only a short-term advantage.

Not a source of long-term competitive advantage. Because it is
valuable and rare, competitors will do what is necessary to develop this
easy-to-imitate strength. Short-term advantage. Should not base
strategy on this type of strength but should obtain benefits of
short-term advantage.

Not a source of competitive advantage. The strength is easy to
imitate and cannot be sustained. Short-term advantage. Do not base
strategy on this type of strength but obtain benefits of short-term
advantage.

Source of long-term competitive advantage. If value is very high, it may be worth “betting the organization” on this strength.

Possible source of short-term competitive advantage but not a strength that can be sustained over the long run.

Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2013). Strategic Management of Health Care Organizations (7th ed.). San Francisco: Jossey-Bass.

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