Strategic Management Analysis of KPJ Healthcare Berhad Report

This report provides a comprehensive competitive strategic management analysis of KPJ Healthcare Berhad, a prominent private healthcare provider in Malaysia. It begins with an introduction to KPJ, highlighting its core values, network of hospitals, and global expansion. The report then delves into the industry dynamics, examining factors influencing KPJ's performance, including the threat of new entrants, substitutes, and the bargaining power of buyers and suppliers. A comparative analysis with Apollo, another leading healthcare company, assesses KPJ's financial performance based on key ratios. The report evaluates KPJ's performance over the preceding year, offering recommendations for improvement and concluding with a summary of the key findings. The analysis covers various aspects like revenue increase, administrative expenses, objectives, shareholder engagement, and the competitive landscape. The report emphasizes the importance of strategic management in the healthcare industry, especially considering the competition and regulatory environment.

Competitive strategic Management

Competitive Strategic Management 1
Contents
Introduction................................................................................................................................2
The concerning industry and unique factors influencing the company’s performance.............2
Recommendations......................................................................................................................6
Conclusion..................................................................................................................................6
References..................................................................................................................................7

Competitive Strategic Management 2
Introduction
The competitive strategic management has become essential for the organizations
competing in the markets. Such organizations are severely saturated with the substitutes for
the customers. This report comprises the competitive strategic management of KPJ
Healthcare Berhad which is Malaysia’s top provider of private healthcare services. The
company is determined by its core ethics of courtesy, safety, veracity, competence, and
constant enhancement. The network of KPJ includes twenty-five expert hospitals sited
throughout the nation. The company has even expanded worldwide like 2 hospitals in
Indonesia, one hospital in Bangladesh, a considerable portion in a hospital in Bangkok and
retirement and an age-care resort in Australia. The company is having its competitive
advantage in the form of a wide range and accessibility in the extremely modest private
healthcare industry. The execution of cloud computing has improved the capability of
medical advisors in evaluating patient information in real-time. It makes sure the conveyance
of a seamless service. The regular improvements are made in the organization to manage
patient’s records, enhance hospital efficiency and advance its Clinical Information System
(KCIs).
The concerning industry and unique factors influencing the company’s performance
KPJ Healthcare is having the vision to deliver exceptional health treatment, care, and
analysis to all the patients. The company is devoted as the most ideal provider of care with
the inventive usage of the technology, expert doctors and skilled staff who are capable of
collaborating to provide the best diagnosis and treatment policies (Rahim, 2017). Add on, the
mission is to enhance the people’s health and communities served. KPJ pursues to maintain a
patient-centered environment and concerted on empathetic care. The company is having
values in the form of offering service with courtesy, ensuring safety, conducting duties with
integrity, practicing professionalism and pursuing constant improvement (Devadass, Sekaran
& Thinakaran, 2017).
The healthcare operations of KPJ in Malaysia recorded a substantial increase in
revenue by 4% to RM 3.3 billion. The revenue was contributed by the major factors like an
increase in patient visits, an increase in the number of beds and surgeries performed. The
extended promotions of medical tourism providers to neighbor nations and increase online
promotions greatly contributed to the revenue last year. The addition of KPJ Perlis to the
network of hospitals in Malaysia made the Malaysian segment liable for 97% of the group’s

Competitive Strategic Management 3
total revenue. KPJ even recorded an increase of RM 3.1 million majorly due to the fair value
of investment properties (Siew, Fai & Hoe, 2016). Along with the increase in activities
during the year, administrative expenses have been also increased.
KPJ is having objectives in the form of:
 To offer a complete series of professional, medical and care facilities and to focus on
work morals and privacy.
 To offer a safe, protected and beneficial environment (Rahman, Zailani & Musa,
2017).
 To make sure that the patients are well-cared and facilitated by expert, skilled and
capable specialists.
 To empower personnel by making sure their wellbeing, enhancing and staff
satisfaction, career development by education and training (Ormond & Nah, 2019).
 Pursue and bind to offering quality par superiority service by the constant
enhancement in quality assurance programs.To offer constant enhancement in the
quality pledge programs (Anthony Berauk, et al. 2018).
KPJ is having proactive engagements with its shareholders as the company
comprehends that it is a major responsibility to offer appropriate and timely information
to the shareholders whenever required. It is quite authoritative to sustain transparency,
maintaining the trust and comprehending the association by active dialogue and
communication with the shareholders (Rosnan, Yusof & Shamsuddin, 2019). The
company is dedicated to endorsing a greater level of communication and transparency
with the shareholders. KPJ is comprised of the investor relations function. The Managing
Director (MD) and President are liable to hold discussions with the shareholders on a
regular basis on the organization’s results and performance (Al-Smadi, et al. 2018).
The factors influencing KPJ Healthcare Berhad’s performance are:
The threat of new entrants: The threat of new entrants is a threat to the prevailing business.
There are several budding stockholders trying to capitalize on the healthcare service which
causes existing businesses to face the threat of new entry (Sandberg, 2017). In the case of
KPJ, it may not have to face the threat of new entrants because it is stiff for new entrants to
enter the industry because of the high original cost. The new entrants have to get approval by
the Private Health Facilities and Services Act 1998 before establishing itself. The new
entrants also have to get approval granted by the government (Nikbin, et al. 2019).

Competitive Strategic Management 4
The threat of substitute: The demand for the products of KPJ Healthcare Berhad will be
pretentious by the price variation of substitute products and services. The threat of substitutes
is considered in the case of KPJ Healthcare Berhad. When it comes to private health care,
these generally charge advanced medical fees in the comparison of the public hospital (Siew,
et al. 2016). KPJ is identified as a private healthcare provider which offers several medical
facility and medical amenities to improve medical ability. KPJ can face a threat as it is a
public healthcare worker and is assisted by the government. The people also tend to choose
private healthcare when the service offered is more efficient (Baumgartner & Rauter, 2017).
Bargaining power of Buyers: The customers are regarded as one of the sources of profit for
the organization. The bargaining power of the buyers is deliberated to be great in the
healthcare industry. It is because there are several medical centers in Malaysia. The
customers are having the liberty to select healthcare organizations and doctors which they
sense comfortable with (Ghazvini & Shukur, 2018). In such a scenario, the great power of
customers can be a threat to KPJ as it can enhance the modest power in the healthcare
industry. The majority of the hospitals in Malaysia are offering the same kind of treatment to
the patients. It reflects that there is low differentiation among healthcare organizations. So,
switching costs for the customers is low and the buyers can easily switch to other brands
(Trigeorgis & Reuer, 2017).
Bargaining power of supplier: The suppliers have a significant role to play in an organization.
The suppliers who source medical equipment are deliberated to be significant suppliers of
KPJ. The medical equipment is deliberated to be essential as these are used by KPJ on a daily
basis. Although, technology development has created significant changes for the medical
equipment (McLinton, et al. 2018). There are different updated and innovative medical
equipment which comes with better features. All of the latest equipment will assist KPJ to
enhance efficiency and effectiveness in undertaking routine activities. The limited sources of
the suppliers in the healthcare industry create limited prospects for KPJ to purchase the
equipment (Chung, Hazmi & Cheah, 2017).
Competition in the industry: The growing number of contestants increases competition for
companies like KPJ. Although, due to the restriction of 20 km distance obligation between
private hospitals, straight rivalry among the private healthcare group is becoming is not so
substantial (Tan, et al. 2019). The rivalry in the case of KPJ is considered to be medium.
Although there are various healthcare groups opposing each other in Malaysia. 20 km zoning

Competitive Strategic Management 5
is prohibiting competition but still considered to be a significant factor for KPJ (Morning
Star, 2020).
Database of information related to benchmark company
The performance of KPJ has been compared with Apollo which is also one of the
leading healthcare companies. Apollo is having a mission to make sure a value-based culture
to drive much-required change towards creating employee champions for attaining better
business results. Apollo is dedicated to being the preferred employer of choice in creating
brand pride. The return on assets ratio in the case of KPJ was 3.98% in 2018 whereas, in the
case of Apollo, it was 1.40%. The net profit ratio of KPJ was 5.42% in 2018. On the other
side, Apollo had a 1.43% net profit ration in the same year. KPJ had a 30.80% gross margin
ration in 2018 and Apollo had 51%. The return on equity ratio of KPJ was 9.67% in 2018 and
Apollo’s equity ration in the year of 2018 was 3.39% (Morning Star, 2020).
On the basis of the above ratios, it can be concluded that the return on assets ratio of
KPJ is higher than Apollo which indicates that KPJ is earning enough money from its capital
investments. Such investments can comprise land, machinery, building and fleet vehicles.
The high return on the assets represents success in the case of KPJ. The net profit ratio of
KPJ is comparatively quite high than Apollo (Nee, 2018). It indicates that KPJ is capable of
turning revenue into profit comprising debt payments and taxes. At last, the return on equity
ratio of KPJ is much higher than Apollo which represents that KPJ is effectively managing
money invested by the investors. KPJ is also capable of growing its value at an acceptable
rate. From the above discussion, it can be said that KPJ is in much better condition as
compared to Apollo (Morning Star, 2020).
Assessment of KPJ’s performance to its preceding year
KPJ’s performance can be evaluated on the basis of the ratios. The return on assets
ratio of 2018 was 3.98% as compared to 3.96% in 2017. It indicates that KPJ is managing
well its assets as compared to the preceding year. It shows that resources are used efficiently
as compared to the healthcare industry and competitors. There are different ways in which an
entity can increase the net income. The entity increases to total sales which automatically
increases the net income. COGS is also one of the major costs which have affected the net
income of KPJ. It kept the direct cost low and improved gross profit margin with the net
income (Ting, et al. 2019).

Competitive Strategic Management 6
The net margin ratio of KPJ was 5.09% in 2017 and increased to 5.42% in 2018. It
reflects that KPJ has been able to increase revenue turning into the profit after accounting all
the expenses. It also led the company to attain a competitive advantage in order to be more
successful (Morning Star, 2020).
Add on, the inventory turnover ratio of KPJ was 45.10% in 2017 and 45.22% in 2018.
The inventory turnover ratio represented the company’s capability to flip products into cash.
The increase in the inventory turnover ratio by 0.12% shows that the products of the company
are in demand. The company made use of advertising campaigns and sales promotions to
increase sales. KPJ is competently moving inventory in the framework of business. From the
above analysis, it can be concluded that KPJ has improved its performance when it is
compared to the preceding year (Morning Star, 2020).
Recommendations
 It is recommended to KPJ to maintain consistency. In order to increase net profits,
net expenses should be reduced.
 For better improvement, KPJ can increase its return on assets ratio. This way KPJ will
be able to convert money into the net income efficiently.
 KPJ is not able to convert stock into cash within a specific period which can create
problems in the routine operations. This way, the company can feel a decrease in
sales. When the company is not able to sell a great amount of inventory than it will
lead to more storage costs and holding costs. So, KPJ is suggested to purchase limited
stock and supply on a regular basis.
Conclusion
KPJ is influenced by the healthcare industry of Malaysia as it has to work as per the
regulations of the host community and government. The health care industry is having severe
competition which is considered to be a significant factor for KPJ. The performance of KPJ
has been compared with Apollo as a benchmark company. KPJ is in much better condition
than Apollo in the terms of return on assets ratio, net profit ratio and return on equity ratio.
The performance of KPJ is evidently better than Apollo. Not only this, but KPJ has improved
its performance as compared to the preceding year which is 2017. There is a .02% increase in
return on assets ratio, 0.33% increase in net margin ratio and .12% increase in the inventory
turnover ratio. It represents that KPJ is improving its performance on a regular basis.

Competitive Strategic Management 7
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Competitive Strategic Management 8
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