Converting Threats In To Opportunities

Although the five forces model 1. Entry 2. Rivalry 3. Substitutes 4. Suppliers 5. Buyers, describe some important threats firms face, it also describes some possible opportunities. Each threat is also an opportunity. By choosing the right strategies one can neutralize these threats. With the ever-changing healthcare environment in USA, where the major hospitals are struggling to stay profitable making right strategies are extremely important.

In a city like Memphis where the population is close to 700,000 and more than 5 hospital systems, competition is substantial. The two major players Baptist Healthcare and Methodist Healthcare has been successful regarding keeping the rivalry between the two. Between theses two systems, they service more than 70% of the Memphis patients. 

1. Entry: They have been successful in restricting new entrants to this market by mostly aligning with the major medical groups of the city, a deterrent for the new entities. By increasing their presence in this area (Methodist has 6 hospitals and Baptist has 3 hospitals), they have exploited the economies of scale in their favor.

 2. Rivalry: They have been able to keep the rivalry between the two only and are able focus product differentiation. e.g. Methodist is known for their pediatric specialties and Baptist with their heart transplant program. 

3. Substitutes: To compete with substitutes , entities can reduce the cost (cost leadership), can improve the perceived quality of its products (product differentiation), can align with substitute manufacturers and by aligning to the smaller clinics / systems Baptist and Methodist systems have converted their threats in to opportunities. 

4.Suppliers: Uniqueness of a supplier can be a threat but by aligning with their suppliers and dealing with many can neutralize the threat. 

5. Buyers: Same way as Suppliers, a few buyers can be threat but increasing that number or becoming your own buyer can be beneficial. Most hospital system also provide different outpatient care, home health services and DME supply in a way becoming their own buyers and serving the patients with in the system.

Disclaimer: Opinions expressed are solely personal and do not express the views or opinions of any other person or entity.

Source: 

Gaining and Sustaining Competitive Advantage, Fourth Edition by Jay Barney

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