An obvious threat is represented by all other entities and organizations that offer similar healthcare services, with an added note with those that do so more efficiently: large organizations such as hospital that are better able to capitalize on both a larger volume of patients and economies of scale that can derive from this. Other small practices on the community are also a potential competitive threat: patients tend to have a high level of loyalty when it comes to the physician they use, which may mean that there is an increased reticence on their part to consider switching their physician. This limits the prospects of potentially gaining new
The external analysis will include two main categories:
Porter analysis, aimed at identifying potential issues such as the bargaining power of consumers and of suppliers, the threat from substitute products/services, the threat of new entrants on the market and the degree of competition;
An analysis of the external factors that can impact the business, such as the political, economic, legal, social or technological environment, as well as the demographic environment, which is of particular interest here, given the community nature of the practice.
1. Porter Analysis. The most important element in the Porter analysis is the bargaining power of consumers. Not enough information about the number of similar practices in the community exist, but it is likely that the bargaining power of consumers is not too- high. The explanation for this resides in the fact that, generally, a physician is not usually changed that easily by a patient; there is a significant lag time before this occurs. If the community is a small one and the number of alternative medical cabinets is limited, the bargaining power decreases. The same argumentation goes for the threat of substitute products or services: there are no real alternatives to the service provided here, which is obviously to the advantage of the practice. At the same time, following the same logical line, there is a low or no threat of new entrants on the market: entry on the market is difficult, because this is a small community, where people are generally reticent to switch their physician.
2. External factors. The demographic factor is one of the important...
This refers mainly to the way the population in the community is likely to vary due to migration in and out of the respective location. The demographic factor is also linked with the socioeconomic factors: the degree to which the community is able to offer new job opportunities and economic prospects for potential future residents is also going to impact the way that the physician practice will evolve in the future, both in terms of the number of patients and its capacity to potentially expand in the future.
The political factors will include the legislative actions that Congress will undertake and that the administration will promote in terms of providing an extensive framework for healthcare reform, one that would provide more people with health insurance. One can expect that such an expansion of the current legislation would allow more people to access health and medical services, increasing the volume of visits and number of clients at the practice.
Expanding the business is definitely an option in this case, but the choice could go for an expansion that minimizes risk, given the difficult economic environment and potential problems that may arise from demographic migrations out of the community. From that perspective, the best option would most likely be a partnership either with one of the larger healthcare units in the area or with one of the similar practices in the community. Such a partnership would allow the small business to benefit from pooling resources and from a larger group of potential clients that can be obtained from larger healthcare organizations.
1. Porter, M.E. The Five Competitive Forces That Shape Strategy. Harvard Business Review. January 2008
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