Strategic Management Report

This report explores the importance of strategic management in business development, focusing on Porter's Five Forces model. It examines the model's history, its relevance in today's dynamic business environment, and its limitations. The report also analyzes the impact of globalization and digitalization on strategic management, using Melbourne Private Hospital as a case study to illustrate the practical application of Porter's Five Forces.

STRATEGIC
MANAGEMENT

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
MAIN REPORT...............................................................................................................................1
Porter's Five Models........................................................................................................................1
2. Present History of Porters’ Forces:.....................................................................................3
3. Concept fits today with other concepts of strategic management......................................4
PART 2............................................................................................................................................1
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

EXECUTIVE SUMMARY
Strategic management is a major part in each and every business or organisation as it
support in developing effective strategies for the business and achieve their goals or targets for
business purpose. The strategic management provide the overall business direction in specifying
the objective of healthcare industry. These strategies are designing different planning, policies
and new idea for growth and development. The Porter's Five Forces Model can be used to
analyse the competition level of business and its functionality. These model is described the
decision making at the time of business operations. In this report, the history of Porter's model
and it is development will be discussed. Section 1 will discuss how the five Porter's forces
affecting organizations and where the model is applicable in organization. Specifically, in which
it is observed very tough for new competitor to increase their business in existing marketplace. In
this way, the entry barriers can be low and face so many new threats (Bryce, 2017).

MAIN REPORT
Section 1
Porter's Five Models
The Five Porters force is very important for development of business it identifies the
actual profitability of company for long period and can analyse the actual requirement of
company (Alkhafaji and Nelson, 2013). This model is useful for planning new strategies for
development. This model is used for long term strategies that is helpful for business or
organisation. It will simply understand as the tool of business strategy and it helps in analyse the
economic condition in this industry. It also identifies company's role and their profitability
within a market. These forces affects the competitive position of a company in the business
environment at global level. These forces are giving a new idea for business development and it
will analyse the structure of business operations.
There are five types of forces applicable on business activities
Threat of New Entrants- Within the healthcare sector, initially some companies invest
money for research and develop a new department such as drug medicine. As a result, such
companies should be dealing with new policy's formulation. They should follow some rules and
regulations for growth and development as new competitors who are coming in market and then
they have their own capabilities to gain profit and try to increase their business in all over the
world. Sometimes, it is very difficult to create profit in marketplace and immediately earn lot of
money because there are already many competitors are available.
Different barriers that should be taken into consideration for any new competitors entering the
market:
Scale of economy, requirement of capital income, product identification, size of company,
government rules and regulation as this is very important part of business that provide benefits to
company (Rahm and Riha, 2012). This industry is not only focusing on the existing market but is
applicable for new industries. Peoples will attract to the new organization and it can influence the
company to change the pattern of business process.
Bargaining Power of Suppliers- the bargaining power of supplier is very high as
healthcare industry depends on their suppliers to provide essential supplies such as medical
devices and drugs. The Healthcare organizations have high bargaining power because it has
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specialist doctors to build their working system in a proper manner. This factor is directly
affected to the cost of goods and services. In this way, the cost of product is increasing in market
on the other hand companies are reducing their product quality. This will minimize their services
and the supplier will change their strategy and provide the best quality of services. Supplier will
change the product according to customer requirement (Eden and Ackermann, 2013). Most of
the companies are depending on the suppliers because they are dominating their company and
increasing their cost of resources supplied by them. Supplier will not sell the same product in
market and effective competitors are against the other party. It can provide the best raw material
and then provided an effective quality of product. It can maintain the relationship between the
customer and supplier. The strong supplier are increasing their product cost and affecting the
sales value in market. Buyer has power to negotiate with the customer and it provides the best
services to customer.
Bargaining Power of Buyers- The private Healthcare aim to provide the best services to
people with more benefits to customers. Customers are attracted to the lower price for products
and services while the buyer take advantages to earn a lot of profit. Buyer can be attracted by a
good position in market while the supplier is dependent on buyer (Foss and Knudsen, eds.,
2013). The price of product is less in market so that the customer will pay less money because
they are only focusing on a single vendor. It is very powerful scheme to increasing their demand
and taking so many advantages. Buyer has skill to negotiate their price so that customer will
easily purchase in very efficient ways. Buyer can be earning profit and they are supply an
effective product in market and in this way, it determines that supplier will earn a lot of profit.
Threat of Substitutes- The organizations is more affected from the substitutes when the
drug is expired. This hospital provides the opportunity in making new drugs, it is that when the
product is available in market and customers are directly purchasing it from industry because the
rate is cheaper and they offer more benefits for the consumer. As a result of this, the threat of
substitutes are very high and they earn less profit in market because they are increasing the price
of product. They offer attractive products and services at a lower cost. They can affect the
competition level of industry; it can be directly affecting their profitability because the customers
are purchasing the product in industry. The substitutes are affecting the organization’s ability to
fix the price for product.
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Rivalry among existing competitor- In this factor, the high rivalry can affect the
competitive environment and it will be a major challenge for old firms who were established
previously. There is a major challenge to increase their profits when it faces so many challenges
in market and the growth of business is also low. Rivalry can damage the market share value of
that firm. It can affect the company through increasing their innovation ideas, increasing digital
marketing, improving their product quality etc. (Frynas and Mellahi, 2015). The monopoly create
company's different structure to earning a more profit in this way, it increases the competition
level of old company.
There are many firms under this industry and it can be increasing their competition level
that is helpful for the customer and product resources. In this way, the company are fast growing
so that they earn lot of profit in market and it is increasing the rate of production in which it will
expand their business in all over the world. On the other hand, the organization is growing
slowly and then it can earn minimum profit in market. Nowadays, the competition level is high
due to many entrants within healthcare industry. In industries, they are fixed amount of every
company is high.
According to Gammenthaler and Lehmann, (2018) this theory is important for analysing
the whole business requirement effectively and efficiently. There is no limit to analyse and
generating a different value in market. Nowadays, the five forces are outdated and other tools are
helpful for development (like what??). Five forces are designed for business purpose but
currently, most of the businesses are using the digital technology for solving problems and issues
(again like what). One could say that as the five forces were designed in 1980 and were more
applicable for business at that time but currently it is not considered a successful tool due to
Globalization, digitalization, deregulation etc (Nouriand Soltani, 2017).
2. Present History of Porters’ Forces:
These Five forces are developed by Michael A. Porter in 1979. This model would be used
for the business planning It will manage the whole external factor of organization. These forces
are very challenging for Michael A (Godoy and Naidich, 2012). Porter’s forces analyse
competitors, buyers, and supplier in which they are interacted to each other.
These main innovative ideas came from five forces that would be provided by Andrew
Grove, the CEO of Intel organization. In 1993, these five forces are developed by Martyn Jones
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and they provide an actual frame work of this model. The five models can be helpful for
identifying the structure of business and underlying main point of firm. Most of the companies
are using this model for development because this model provides perfect frame work for
corporate planning and strategies (Gregorini, 2012). They are provided a perfect framework and
follow some different steps to increasing services. In this model, the competition level is
increased in industry and it will improve business activity. The objective is to develop a new
strategy that is to help for business planning.
Porter has been worked on this field. It is a widely used method for the analysis the
external environment of an organisation. It is applicable for business competition level and
increasing their profitability in market. (Hill, Jones and Schilling, 2014). These five forces
identify the actual business power and determine critical situation for enterprise aspects. These
five forces are derived for business process to maintain economy level.
According to Napshin and Marchisio, (2017), it is concluded that there are various
limitation in this forces so that many authors give their own opinions such as selection of
information is important part of each and every business and project. The key ratio of data is
reduces at the time of planning and it is necessary part that affect the business strategies.
According to Nouriand Soltani, (2017), it reduces the performance of company; it analysis the
leverage ratio, efficiency ratio, Stability ratio that has reducing the level in the business process.
There are other tools very efficient to work on digitalization to promote and market the products
effectively. For example – Melbourne Private hospital uses various social media platforms for
promoting their healthcare services.
3. Concept fits today with other concepts of strategic management
This concept includes both strength and weakness in creating a plan according to the
requirement. In these forces, the industry is holding a strong position in market. It focuses on the
growth of organization and determine market rate. These forces do not have any actual
justifications that are useful for market and their environment. These forces are static in nature
and cannot take so much time. (Hitt, Ireland and Hoskisson, 2012) Sometimes, it is very difficult
to understand the market values and competition level because the market values have been
changing according to the innovation. The customer demand has been changed and they are not
steady so that they will create a new model and approaches. Industry can use this model to
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increase their business performance by 20% market share and development(Gregorini, 2012)
Nowadays, the main goal is to maintain the innovation skill that would be increasing their ideas.
Many modern technologies and other information are available on internet that will be helpful
for the business operations. They can develop a new concept through Digitalization,
Deregulation, and Globalization. They analysis the overall profit and their capabilities, the
business structure has been changed so that it will increase their significance of digitalization.
This is affecting the competition level in which it will gain more profit and increasing their
importance in all over market. Most of the organizations build their business in other country
while it can be improving their communication with other company because the technology has
been spreading all around the world. It can build an effective relationship with other company
(Keupp, Palmié and Gassmann, 2012). It will affect the globalization in each and every area of
company. Deregulation in Melbourne Private hospital is that they are innovating a new idea for
development such as expensive machines, effective staff, offering many facilities to the patients
such as special rooms and amenities and they are using it in different ways for business
development. On other hand, new organization is entered in existing market and applied new
concept for business.
Impact of Globalization in organization-
In today's scenario, the organization is mainly focused on globalization and that is not
helpful for export and import business. They are increasing progress rate in market because the
communication and technology factor affect the business. It is very easy to collaborate to any
product and services through modern technology (Keupp, Palmié and Gassmann, 2012). It is
beneficial for customer to compare the price of particular product in any e-commerce site. It is
very easier to purchase a product in very effectively. It is a very fast process to collaborate with
other product so that it is required for organization to increase their strategies and concern about
the price, and quality of product. The main objective is to provide the best quality of services
and they are loyal to their customer. Globalization is important process to increase their impact
on a business process. There are some factors to manage the whole business process and it is an
important driver of globalization is: Information and communication technology, low
communication cost and low transportation cost. This driver is directly affecting the business
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process when it has large number of clients involved so that it can grow their business in all over
the world.
Impact of Digitalization in organization-
It is main aspects of business that are not included in the Five Porter's because this is used
when the technology are spread in all over the world. The structure of company has been
changed because of the usage of the new digital technology. This digital concept can be
transforming the business needs and requirements (Lasserre, 2017). Many companies use digital
technology because it is very helpful in identifying new approaches of launching a new product
in market. For example - the private hospitals can promote their services with the helps of
internet.
It is the best medium for companies to explore their business through digital technology
and with the help of digitalization, they can provide information through website and offer many
unique advantages for customers and provide an effective service. Nowadays, digital technology
is used in everywhere so every organisation uses it for better work (Poister, 2010). Most of the
companies are participating in main role to meet the requirement of customers and give the best
quality of services.
Strategic management is a process of planning innovative new ideas in the business. .
Most of organization uses this modern technology to plan a new strategy. Most of the companies
are using foreign business method to expand their enterprise in all over the world (McKiernan,
ed., 2017). The Melbourne Private hospital is using a modern technology like World Wide Web
because all the details are available on internet. As customers are using different types of
technology and surfing internet for new product and price comparison, this forces most
companies to embrace technology because it will be used as a mean to increase their selling and
purchasing a product.
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PART 2
Melbourne Private hospital Australia -
It is a healthcare organization which leads hospitals and medical facility in Australia. In
Australia, there are mixed system in health care which contains two major things that are
universal health care and private providers. The Melbourne Private hospital is one of private
providers. This hospital currently leading all facility related to surgical and medical. It provides a
range of highly acute surgical and medical healthcare services for over 20 years. This hospital
has 124 beds and co-located with Royal Melbourne Hospital in Parkville. The hospital core work
is mainly related to heart, lung and bone marrow transplantation. By time, this hospital became a
large hospital which closely linked with Mercy Hospital, Melbourne. It is affiliated with
University of Melbourne. In Melbourne Private hospital there are various medical and surgical
wards and it also provides psychiatric unit and an emergency department.
This company is situated at royal parade, Parkville VIC 3052, Australia. This hospital
provides many services like Neurosurgery, Cardiology, Medical & Surgical, Infusion and
Oncology. These services are provided by a specialized team of doctors and specialists. It has
many competitors that are hugely affecting their business such as Bethesda Hospital, Royal
Adelaide hospital, st. Vincent Hospital Melbourne and many more.
Issue faced by Melbourne Private hospital
Private sector is one of the best sectors in healthcare industry but it is not provided better
emergency services and acute care facility. People found it very stressful environment in private
hospitals and their nursing staff not worked well, consequently people cannot give their
preference to private hospitals. They have more conscious about their care. In addition, the
public hospitals have the best specialist and doctors for providing better services. Due to which
the patients visiting Melbourne private hospitals were gradually diminishing. The competitors
are providing efficient and quality services to their patients and better choice is they provide
these services at very cheap rate. In this context, the Porter five force frameworks will be applied
which helps in analysing the competition of Melbourne private hospital.
The recommendation for this hospital that they should provide better services from their
competitors and these services should be given at the lower rates. If they follow such strategy the
organisation can generates competitive advantages in their target market.

Porter five forces analysis – the Porter five forces is used for technical and critical analysis of
the competitive advantage. It looks at the factors that can influence the level of competition in
any industry. The Porter five forces analysis in a health care organization which is operated for
profit making is as under beneath:-
Industry Competitors
It is intensity of rivalry among established firms earlier. This factor commences that there
are already many firms providing health care products and services in health care industry. For
private sector in health care industry it is very competitive market among old clinics and newly
established firms. If any person will be in under critical situation or get ill, in health care there
are numbers of firms of medical treatment for helping them. And according to in today's scenario
every clinic provides fast services for their customer loyalty. They provide their services at the
cheap price for making brand image and for attracting their clients. The competition in rivalries
is intense; in accordance to the private hospital. Melbourne Private Hospital is spending a big
amount of money in their research and development departments for providing better services.
They develop their new drugs speedily and their medicine is best healing product this will help to
their patient. This is the best element or feature of this organisation and competence for
eliminating their competition. In insurance segment the rivalry is also intense because people
will not purchase more than one health care insurance policy. So some of big insurance
companies target the large healthcare companies to their employees and compete with each
other. In this hospital, There are no switching cost and no differentiation same medicine
available at every pharmacy in healthcare industry. So for this reason, the company can
maintained a balance and there is no strong competitors
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Threats of Substitute Product
Basically there are no substitute product and services in the healthcare industry. The only
substitutes are generated from some people who have not trusted going to the hospital for their
medical care. The only substitute that can come with finding the best method to help persons for
the both healthiest and cheapest reasons are considered centres that provide treatment such as
acupuncture or like a massage therapy which are specific treatments. So, for Melbourne Private
Hospital, emergency treatment is the place to go for a professionals and this will a threat for the
management team of this organisation. There are also big subs and its effects on the patents of
the drugs that it have expired by the time. After the patent has expired, every healthcare
organization will make that type of drug and this organization is comes like a competitor in front
of the previous organization who makes same drugs and medicines. In normal case in healthcare
industry substitute are not affect the field. There are some substitutes such as same type of
medicine which treat main care problems. However, some people who trust in such type and
practice this medicine is a high in recent years when discuss about substitutes based on beliefs
and assumptions of the persons. Substitutes are influence the business activities of this
organization in private health care sector.
Threats of New Entrants
There is very tight threat for new entrants in healthcare industry. Every private hospital
organization must have too many funds for investments for their research and development for a
new drug come in their market. By completing this process of making a new drug this
organization deal with their customers for the policies and that must have consent with the
government agencies before the release of that particular drug. The government agencies discuss
about the rules and regulation about the health care industry and every company should follow
all these rules for better working condition. The companies also follow because of easy entry
and for the easy operations. The main barrier for the Melbourne Private hospital is the needs of a
big amount of money because of the governmental issues for example purchasing property patent
and cash requirements for establishing more supply chain networks form their customer support
service. There is also a trouble in brand switching factor. It makes a new threat to enter in a
healthcare market. If a patient has a health issue of a specific kind of problem then it will hard
for that patient to switch to the new product from old product or any kind of therapy. Thus, these
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factors prevent from entering the market. In the competitive environment the decision of
management team are very important for the achievement of success.
Bargaining Power of Buyers
Healthcare industry eliminates the people chasing a large supply numbers and it is a
situation where buyers have influence in the industry. And now they have a right that they can
state how much they are willing to buy a special product and services. In this type of field the
buyers have not work as unlimited bargaining power because it depends on those people who
have suffered from diseases. People will get sick and it effects on economy of this industry. All
companies in health care industry serve their best services and it reduces the impact of
bargaining power of buyers. So every individual who have some critical situation, have
opportunity to choose a certain clinic. Patients are normally low sensitive for pricing as they seek
the best healthcare service provider in private health care market. In this hospital, there are also
problems regarding clients because for clients, the product and services are also provides at a fix
price. This low bargaining power affects that industry in competitive environment for the seller
and also affects the seller's capacity of profit achievement. Buyers have a right to bound the
sellers for price reducing, increase quality of product and services, bound to give offer and better
services to them. All of these things shows that cost to seller will increase. By giving this
concept the Porter created a lasting effect in market theory. In each sector of industry number of
seller are more than the number of buyers then buyer's power is high. The bargaining power of
buyers refers the strong position of buyers in this industry. In this context, there are some
elements that are buyers purchase too many products in bulk quantity and product is not
differentiated. There are shopping cost also low and the buyers are so sensitive and it has a huge
impacts on that organisation.
Bargaining Power of Supplier
According to Porter it refers to the pressure of suppliers that can be exerted on firms by
reducing quality, low availability of products and services and raising prices. The supplier
power, the Porter contains various factors in his theory of bargaining power of supplier. In an
industry number of buyers are more than number of suppliers than it is a situation where supplier
bargaining power is high. There are also many reasons of high power of supplier like buyer are
not price sensitive, uneducated regarding to the product and services, supplier's product is
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different from others and if the buyers does not represent a large area of the supplier's sells. If in
this sector there are no substitute products available easily then the supplier's power is high and if
this conditions are opposite then supplier power is low. This tool and segment also help in
Melbourne Private Hospital and this will help to the company in getting competitive advantages
in its target market. Suppliers can also apply pressure on a firm by increasing prices of goods and
services, controlling the quality and adjusting the availability or delivery of inventory. Every
organization has needs to end operations or transfer to other industry to avoid being dictated by
the whims of a supplier.
CONCLUSION
Form the above report, new competitors are coming in market and then they will share
their capability to gain profit and try to increase their business in all over the world. As per the
above report competition in rivalries is intense, in accordance to the private hospital. Melbourne
Private Hospital health-care industry are spending a big amount of money in their research and
development departments for providing better services. This hospital perform 15 to 20 renal
transplants average per year and it is a major player in the synchronized transplant sector of sis
donor kidneys into 6 recipients. It is a part of the team that undertook the medicare milestone of
the first twelve techniques that paired of kidney exchange of compatible patients.
The competitors of this organization attract their clients by offering many special services
and these services give at the price which is lower than the Melbourne private hospital. There are
a hospital St. Vincent, and it follows a different strategy that is provided special services to its
patients after he or she recovers from injured. This will help to its competitor to compete this
Melbourne private hospital.
It gets $116518000 as revenue from various national and international healthcare and its volume
of business is from operating activities - $1040712000 in 2017 and from non operating activities
– $7801000. It has total $881665000 as net assets in 2017 and in its equity value $540139000 in
2017.
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