When it first started, Health Care Services Inc. (HCS) was doing well in terms of getting business, managing the work that came along and managing employees. This is why employees acknowledged that at that time HCS was doing well. The founding partner and at the moment’s manager Hal Allison had the right drive and entrepreneurial spirit to catapult the organization from the start position to the one it became much later. This success was later followed by opening subsidiaries such as the founding of the new corporations to work alongside HCS. These were Healthcare Medical Supplies (HMS) and Home Healthcare Personnel (HHP).
The positioning of the company was well done. Since the supply of medical equipment at the homes of people was successful, the company was well positioned to supply other medical related items such as personnel and services. However, the location positioning was hard in the business due to the divided management who had to commute 90 miles between the companies. This led to straining of resources as well as additional costs for having to run businesses under different roofs. Further, Hal Allison did not think that other managers were capable of running the businesses effectively and spread himself thin in order to meet the managerial requirement of these businesses.
It is notable that Mr. Hal Allison had a control problem since he would not let management handle managerial issues and micromanaged all levels of the organization. The organization was achieving great expansion and it seems that Mr. Allison took a lot of credit for it even though at the time it had to do with the positioning of the company, the demand for the products and services they offered, and the business environment surrounding the industry at that time. More acquisitions such as that in 1995 were leading the company to greater heights but causing more problems internally as Mr. Allison felt that the other managers were not capable of handling business that came through. On the other hand, the other managers saw this as an opportunity to consolidate operations under the same roof in order to save on cost and improve revenue.
Recent developments on the case show that there were inevitable changes in the healthcare industry that were standing in the way of HCS’s profitability and growth rate. Competition in the industry increased, creditors had a tougher time paying, Medicaid was reduced, Medicare reimbursement rates were reduced, customer choices changed and government regulations increased. All these changes were beyond the control of HCS but inevitable all the same.
This situation can cause the business to collapse since the environmental changes were not favoring business. While other partner proposed selling the business while it was still profitable, Mr. Allison saw this as a growth opportunity. As aforementioned, Hal Allison accredited himself to a lot of the business’ past achievements and still saw this as something the company could handle. He believed the other managers were not up to the task ahead to stay relevant in the business, and that he had to keep a close look at them in order to push them to get work done. However, operational costs were rising and Mr. Allison was aware of this and the effects it had on profit margins. His abrasive nature was not helpful to help the management work together in developing a solution that would either bail the company from its current problems or find an alternative course of action.
The company needs to have an internal analysis to study its ability to handle the current challenges facing them. This should be done by conducting a SWOT analysis in order to identify the strengths and weaknesses of the company (Pearce and Robinson). A SWOT analysis would also help dissect the threats facing the company and opportunities that can be exploited to be the course of action for the future. It is through this analysis that the business can identify its position in trying to deal with the current challenges.
It is also clear that the market has changed, and that the supplied offered by the business may no longer be in high demand. However, the company already has established a name and reputation in the industry which is an important asset. The company should, therefore, reconsider its positioning. Through research and development, HCS should identify what new demands there are in the market and if they can meet them. Having established a brand name that is recognized and respected by customers, the company would not suffer the liability of newness when selling new items.
Using this approach of positioning itself in such a way that it deals with different products, HCS may have to identify a segment in which it will sell the items proposed. This, therefore, means that HCS should consider using the marketing mix (the 4 Ps of marketing) to identify what products and services to offer. Once this is identified, the company will identify the right product offering that will make the company relevant in the industry all over again.
HCS should also reconsider its management team. Clearly, as driven as Mr. Allison is, he is a toxic leader and manager and people in the organization are at a position where they are hesitant to work with him; employees and partners alike. A management overhaul is therefore necessary in order to create a management team that will pursue the interests of the organization first, and aside individual differences and interests.
Recommended Course of Action
From the recommended propositions above, the course of action to be taken is that the business should not give up just because tough times have presented themselves. With the right strategy, the business should be in a position to survive in the changing environment.
The first step, therefore, would be to conduct an analysis both internal and external. Internal analysis will be done using a SWOT analysis which evaluates the organization’s capabilities and how they can be used to the benefit of the organization (Pearce and Robinson 166). An external analysis, on the other hand, will help the company identify the threats facing the business and the opportunities the environment presents. These opportunities are what will be exploited using the identified strengths and capabilities. For example, the case mentioned that the change in this industry included the change in customer preferences. Identifying the current preferences of customers is an opportunity that HCS could exploit using the strength they posses of knowing the industry after being in it for a long time and having a brand name that is recognizable by customers.
After the organizational capabilities have been identified, it is important that the company recognize the generic strategy it is going to adopt. The options of the strategies are either cost leadership, which the company will achieve competitive advantage by selling items at lower costs, or differentiation whereby the company will offer added value at the products or services offered earning a premium price for it (Porter 14). In the case of HCS, it makes better sense to use differentiation as opposed to using cost leadership. This is because the much larger companies competing in this industry are able to offer lower prices since they have the advantage of economies of scale and massive resources that HCS does not have.
With the generic strategy of differentiation having been chosen, HCS should identify the market segment to correctly position the differentiated proposed products and services. A market segment identifies the customer needs and develops the profiles of these customers in order to effectively meet their needs (Whalley 74). Selecting the segment to serve and developing the products to meet their needs is targeting. HCS should target a customer segment that has no issue paying for the premium pricing that will come with the added value of the differentiated product or service.
In order to effectively place the proposed differentiated product or service in the market, it is important that HCS position this in a way that the customers will buy. Positioning involves implementing the plan to the targeted segments having considered the right price, promotion method, in the right locations (Whalley 78). It is important that HCS recognizes its past mistakes and shortcomings and keep away from that with this new proposed strategy. For example, Hal Allison could in the past propose going into war with competition while there were not enough resources as well as the right plan to get this done.
The marketing mix will help HCS avoid blindly getting into the market. First, the product identified as a result of research conducted will be that which is being highly demanded in the market such that it is a response to customer needs and not the initiative of HCS. Secondly, the promotion will ensure that customers know that HCS is offering this product. Promotional efforts will, therefore, be aimed at creating awareness in order to woo back some of HCS former customers and create new ones. The third P (place) means that the positioning of the location is going to matter and play a role in the success of the current strategy.
It is important that HCS starts its business in its current location as it is using the brand name and reputation as leverage. Going into new locations where other companies have already established may not be good strategy due to intense competition. Lastly, the pricing done when using a differentiation strategy is usually a bit higher than that of competition. This is because the company is using value added as the way to reach out to these customers. Pricing, therefore, is going to be slightly above competition but not too high such that customers will not derive value from the premium pricing they pay for.