Health care real estate investment trusts

Health Care REIT: Strategic analysis

Evaluation of the company's external environment

Health Care REIT is poised to take advantage of several critical demographic shifts. The rapidly aging population and the fact that individuals are living longer means that more seniors may be interested in the types of exclusive, luxury assisted living facilities offered by the company. On the other hand, the recent international economic crisis and lagging recovery in America means that many seniors' (and the children of seniors) have seen their retirement savings and stock portfolios impacted in a negative fashion. Also, advances in technology such as mobilized stairways and chairs have made it easier for seniors to remain in their original homes, rather than transition to assisted living facilities. While culturally, children are less apt to 'make room' at their own homes for grandma and grandpa, senior's determination to take care of themselves better and to modify their lifestyles rather than surrender their independence entirely may mean lowered demand for Health Care REIT's services. Insurance companies may also be less willing to offer support for extensive long-term care.

Evaluation of the company's internal capabilities

Health Care REIT has differentiated its product offerings over the years, but retains a fairly concentrated executive officer structure (Executive Officers, 2010, Health Care REIT). Although the company has expanded and diversified its interests from its original offerings of senior assisted living facilities, healthcare management at the high end of the market remains its focus.

Business level strategies

Health Care REIT markets itself as a high-end senior living facility, with luxury accommodations for individuals who no longer can care for themselves independently. It also pursues a strategy of differentiation in its product offerings, as a strategy of risk management. As well as luxury assisted living, the company also has invested in acute care facilities and property management. It strives to provide leadership in terms of the quality of the services it offers.

VRIO Framework

Value: Health Care REIT does not offer financial value in terms of its services, but it does offer the concerned children and relatives of seniors the peace of mind that their loved ones are being taken care in the assisted living facilities and in acute care facilities.

Rarity: Health Care REIT is one of many luxury and acute care investment properties on the market.

Imatability: Given the lack of available credit for starting new property ventures and construction, the company's current facilities do give it an advantage. Financial barriers to industry entry are higher than they were in the past. This can act as a barrier to 'imatiblity' of its business model.

Organization: Health Care REIT has a fairly concentrated organizational structure. While this can be an advantage in terms of assuring consistency of service, it can also result in narrowness of vision, such as (perhaps) a tendency to focus too much on high-end offerings, when seniors may have less financial leverage than in the past.

Sources, rarity, and imatability of cost advantages

Economies of scale may be possible, given the size of Healthcare REIT. Unlike some of its competitors, the company was an early, first mover in the field of assisted living. According to the "History" section of the company website, "Today, Health Care REIT is a member of the S&P 500 Index and has an approximately $7.5 billion portfolio spanning the full spectrum of medical, senior living and health science real estate." Its long-standing traction in the market and difficulty of securing new credit to build new structures to compete with Heath Care REIT can secure it a market advantage.