If Brookdale is able to reduce its operating costs, the company should be able to capitalize on the growth opportunities that the next few years and a rebound in housing prices will represent, allowing it to return to profitability, a track that it should be able to carry for several years or even decades.
The company has reasonable power over its suppliers, and its size allows it to offer prospective customers a wide range of options, which can reduce shopping around. The industry has low intensity of rivalry, although it must contend with some strong substitutes at times. The demographic trends, however, favor continued growth, which combined with the other factors renders the industry favorable for Brookdale.
In addition to the Five Forces, it is worth considering the industry life cycle. Most industries can be seen as having four distinct life cycle stages: Introduction, Growth, Maturity and Decline. The assisted living industry is in a growth cycle but is heading towards maturity. The business will peak in the coming decades, according to the demographic trends. Although the industry has exited for a long time, the current growth spurt has rejuvenated an otherwise maturing business. However, the demographic situation post-baby boomer represents a multitude of challenges for Brookdale, as the industry will enter the decline stage of the industry life cycle.
The strategy that Brookdale should adopt, given that they are already the largest player in the business, is to take advantage of the growth to build the size of its firm. This will involve purchasing other firms within the industry, in an act of consolidation. Ultimately when the business matures, Brookdale's size will give them the brand recognition and economies of scale to better compete against smaller rivals. Fortunately, one of the characteristics of a mature industry is that it can be a cash cow. The free cash flow that Brookdale generates from the high occupancy during the maturity years will be needed to formulate and implement strategies that will help transition the company into the more difficult operating environment that is expected when the decline stage begins.
As the industry moves into...
When the baby boomer generation begins to die off, the industry will go into decline, with customers and revenues contracting. This will place challenges on all industry providers. The intensity of rivalry will increase to severe levels, and the industry will become increasingly difficult, even for the market leaders. To defend against this, Brookdale will need to not only build itself over the coming years to a position of industry dominance but will also need to use some of its free cash flow to diversify operations towards industries that are entering the growth stage. This will provide alternate sources of growth and cash flow, and the dominant market position will reduce the degree of competitive intensity. However, Brookdale can also expect that its competitors will adopt the same strategy going forward.
Works Cited:
Brookdale Senior Living website. Retrieved September 24, 2009 from http://www.brookdaleliving.com/about-brookdale.aspx
No author. (2007). Porter's Five Forces. QuickMBA.com. Retrieved September 24, 2009 from http://www.quickmba.com/strategy/porter.shtml
Brookfield financial data from MSN Moneycentral. Retrieved September 24, 2009 from http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=BKD
Emeritus financial data from MSN Moneycentral. Retrieved September 24, 2009 from http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=ESC
No author. (2009). Comprehensive Assisted Living Data Released. Assisted Living Federation of America. Retrieved September 24, 2009 from http://www.alfa.org/alfa/NewsBot.asp?MODE=VIEW&ID=588&SnID=1171858449
Ginn, Gregory & Young, Cheri. (2003). Competing in the Assisted Living Industry: A Hospitality Perspective. Nursing Homes. Retrieved September 24, 2009 from http://findarticles.com/p/articles/mi_m3830/is_3_52/ai_99399701/
Grimes, Richard. (2008). Consumer-focused Approach Fuels Assisted Living Growth. Long-Term Living. Retrieved September 24, 2009 from http://www.entrepreneur.com/tradejournals/article/188854060.html
