Competitive Strategy and Groups

The competitive strategy of a health care organization is a formal plan for dealing with the market movements made by competing health care firms. A competitive strategy facilitates the positioning of your firm in the right place at the right time with the right product, thus establishing a competitive advantage for your firm. Your competitive strategy creates value when it allows your firm to create new competitive advantages faster than competitors can mimic your existing competitive advantages.

A health care firm with a relatively small set of products (for example, a two-physician pediatric medical group) may be able to operate effectively with a single competitive strategy (because the geographic market is well defined and the competing physicians are likely to be stable within the market). However, a large, integrated health care system, such as one that has a 650-bed hospital that also serves as a Level I trauma center, owns three rural feeder hospitals, offers expanded home health services, and is a teaching hospital for the nearby medical school, would likely use multiple competitive strategies. Given the wide variation on products and services offered, this complex health care organization competes in several markets, each defined very differently.

Organizations tend to be labeled according to their competitive strategy perspective. Miles and Snow suggest there are four organization types, based on competitive strategy: defenders, prospectors, analyzers, and reactors. Defenders search for stability in the market and work to maintain the status quo of their competitive position. They do not actively search out new product opportunities and seldom seek new avenues for existing products.

Prospectors specialize in research and development. They are in a continuous state of advance and seldom focus on any one idea for very long. Prospectors rarely receive all the possible benefits of a new product, because they move on to the next new idea before exhausting all the efficiencies from the “older” product.

Analyzers typically remain true to their core business, while actively seeking out diversified opportunities. They attempt to maximize both the value in being an efficient defender with the possible value of being a first-mover prospector.

Reactors are seen as not really having a defined competitive strategy. Instead of developing a deliberate competitive posturing plan, reactors are unable to respond or are inconsistent in their response to their competitors' market movements. Although reactors seem to do little conscious strategic planning, this “strategy” may actually be feasible in highly regulated environments where innovation is not readily rewarded.

Porter provides another competitive strategy categorization scheme. He overlaps the two factors of strategic target (for example, the product appeals to either a broad or narrow audience) and strategic advantage (for example, the value of the service is derived by either its “customization and high cost” or its “standardization and low cost”). For example, a county hospital would likely be seen as offering standardized, low-cost health care services to a broad population base. In contrast, an ophthalmology practice focusing on customized, high-cost laser eye surgery would likely be seen as having a narrow target audience.