Electronic Health Records EHR -- Research Paper

  • Length: 8 pages
  • Sources: 7
  • Subject: Business
  • Type: Research Paper
  • Paper: #6233990

Excerpt from Research Paper :

There may be specific circumstances for specific customers where these substitute options become more attractive, but as a whole, they exert little threat.


Barriers to Entry. Barriers to entry are modest. There are no significant technologies to acquire or license, no research and development investment, or expensive equipment needed. Existing firms do not possess patents that prevent other entrants from operating effectively. Some companies may choose to invest in more advanced service offerings for customers, including refrigerated storage, storage for boats/RVs and other larger items to enhance competitiveness, but depending on the individual market, these options are not required.

In fact, a large portion of the industry is made up of small, independent operators who were able to launch their businesses with only a modest investment in real estate, warehouse building construction/modification, and general start up costs. Particularly notable in demonstrating the low barrier to entry in this industry is the fact that "there are some 27,650 small business entrepreneurs (90% of all self-storage companies) who own and operate just one "primary" self-storage facility." (SSA, 2010).


Supplier Power. The supply elements used by the self-storage industry are primarily: real estate (for facility locations), construction and engineering firms (who build and maintain facilities), labor, and power utilities (electricity for lighting, refrigeration and other facility operations). Mobile self-storage companies are also dependent on the price of fuel for delivery/pick-up trucks. Suppliers of fuel and electric power and market prices for these commodities are not subject to any control by self-storage companies; likewise, the real estate market. Suppliers of construction and engineering services have little power, as self-storage companies can always select or switch to another service provider.

The industry is "labor-intensive: average annual revenue per worker for a typical company is about $110,000. About 90% of self-storage companies operate one facility." (First Research, 2009). However, as labor in the industry does not require specialized educational degrees or training, only general skills, the pool of available labor is large, especially in recessionary times, and has little power.


Buyer Power. Buyer power is relatively high. For the most part, buyers are individual consumers, families, or businesses. While commercial customers typically make up about 25-30% of a facility's business (Lucas, 2009), there are few "enterprise" customers or large-scale users of self-storage facilities who are in position to negotiate for more favorable contract/pricing terms or otherwise exert pressure on the industry as a whole. Indivudual storage operators, however, may often find themselves with a single or small number of commercial customers who have more power with respect to that specific operator.

Additionally, because of the large number of self-storage and mobile storage operators in the industry, buyers have many choices, thus brand identity and price sensitivity can exert an impact on the buyer's decision. Additionally, geographic location can also be a factor for fixed-location self-storage facilities. Customers are more likely to choose a facility closer to their work/home or other convenient location. Self-storage companies must compete for customers based on price, special offers, and amenities/additional services, such as air conditioning and 24-hour security.

Buyers would incur "switching costs" to chance providers, in the form of time, inconvenience and cost to move items from one storage facility to another, so are less likely to switch once their items are stored. But at the point of their initial selection of a self-storage operator they exert significant power.


Rivalry. Rivalry is high. Because of the low barriers to entry and the competition for customers, self-storage firms must continually invest in marketing, sales promotions, and service improvements to attract new customers and bring back repeat customers. "The profitability of individual companies depends on marketing and pricing. Large companies enjoy economies of scale in administration, marketing, and purchasing and are often better able to finance acquisitions. Small companies can compete by specializing in local markets or by offering niche services. About 90% of self-storage companies operate one facility." (First Research, 2009). This includes operators of franchise locations.


Mobile vs. Permanent Storage Facilities. The most significant challenge to the "traditional" self-storage facilities (where customer bring their goods on site to a locked unit) is the emerging category of mobile storage. Mobile storage companies have one marketing advantage, and that is the visibility of a mobile storage unit within a neighborhood during the period when it is on site at a customer's location. Other residents/businesses in the neighborhood will clearly notice the storage unit (all of which are prominently branded), generating awareness and stimulating demand as they start to think about their own items that could also be so conveniently stored. Fixed location facilities should evaluate converting a portion of their facility into mobile unit offerings.

Compete on Service Instead of Price. For most of its history, the self-storage industry has competed primarily on price and convenience. Companies could differentiate themselves by pursuing the opposite strategy of competing on service and amentities to attract a more affluent customer. Wealthier customers will be less price sensitive, and at the same time, will place more value on extra security and service features such as motion detectors and biometric access. For example, some storage companies have started to cater to this niche, but potentially profitable market. (Curtis, 2007). More investment is needed by an operator up front in facilities and systems to serve this market, and securing locations in more upscale areas increases real estate costs. Nevertheless, in a more volatile economic climate like today, this demographic also offers the benefit of willingness to pay a premium price and lower risk of default.

Limit New Construction. Given the industry consolidation and economic recession, which is not yet over particularly in the real estate segment, self-storage companies would be advised to limit their new facility construction. Instead, to expand revenues and market share, an acquisition strategy would be more effective. As the example of Public Storage outlined above, this increases a company's market penetration, but does not run the risk of splintering an existing customer base into smaller portions and having to compete against already existing facilities for new business. Investments in construction, if any, should focus more on facility improvements and enhancements to increase competitiveness of a self-storage operation within its existing market. For many facilities, continuing current operations at the status quo will be sufficient to ride out the current market and enjoy steady, if slow, growth.


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