Competitive strategies adopted by private hospitals in Nairobi
Abstract
The evolution of business strategy was driven by the practical needs of the businesses and
strategic planning process was associated with the problems faced by the managers in the
1950’s and 1960’s. They faced the challenges of coordinating decisions and maintaining
control in increasingly large and complex enterprises (Henderson 1989).
Organizations on the other hand consume resources from the environment (as inputs),
transform them (throughput process) and release them (as output) to the same
environment (Porter, 1985; Ansoff and McDonnell, 1990; Thompson and Strickland,
1998; Johnson and Scholes, 1999). Firms need to constantly adjust to the political,
economical, social cultural and the technological changes in the external environment.
Ansoff and McDonnell, (1990) agree that due to globalization and increased international
competition many firms have been forced to make dramatic adjustments to their
strategies. Those that do not change experience a strategic problem, which arises out of
maladjustment of an organization to its environment (Ansoff and McDonnell, 1990).
Aosa (1998) supports this argument that failure of a firm to adjust to its environment
jeopardizes its future success.
Given the changing environment, organisations employ various competitive strategies.
Competitive strategies are concerned with creating and maintaining a competitive
advantage in each and every area of the firm’s business. The generic strategies that can
be applied to all industries as they are not industry specific include overall cost
leadership, differentiation and focus strategies.
The health care system in Kenya comprises of two sectors, one that is official and another
that is unofficial. The official sector falls within the regulatory purview of the Ministry of
Health; while the unofficial one comprises of those health institutions and providers who
the Ministry of Health has no control, i.e. the traditional healers. This Research project
has focused on the official system specifically targeting the private hospitals in Nairobi.
The hospitals in Kenya operate in an environment that has seen dramatic changes in the
last two decades. Wamalwa (2006) observes that the hospitals in the third world marked
a radical turn in the 1980’s. She observes that liberalization in Sub –Saharan Africa
introduced the concept of Structural Adjustments Programmes (SAP) that brought in the
cost sharing in public hospitals (Wamalwa, 2006). It allowed doctors working in public
hospitals to engage in private practice during their free time and this move further
increased competition for provision of health care in hospitals. In order to establish how
the private hospitals in Nairobi have been responding to environmental changes and how
they position themselves competitively in the industry, the researcher has carried out an
empirical study of competitive strategies adopted by private hospitals in Nairobi. The
researcher focused on competitive strategies adopted by private hospitals in Nairobi.
The objectives of the study were to identify environmental changes that have affected the
private hospitals; to establish the competitive strategies adopted, and identify the
challenges faced in implementing their competitive strategies. The study will be benficial
to researchers, proprietors of private hospitals and policy makers who will get pertinent
information for policy making and planning.
The study employed a descriptive research design to establish the competitive strategies
adopted by private hospitals in Nairobi. It also combined the use of a cross – sectional
survey design. The population for this study were the private hospitals in Nairobi. The
researcher did a census survey. He surveyed twenty seven hospitals (27) as provided by
the Kenya Medical directory (2010) as private hospitals admitting in-patient capacity of
twenty beds or more. Two methods of data collection, the primary data and secondary
data collection methods. The study used primary data that was collected by use of
questionnaire containing both structured and non-structured questions.
The data collected was entered and analyzed using the Statistical Package for Social
Sciences (SPSS) and Micro Soft Excel. Descriptive statistics mainly the Measures of the
Central Tendency (Mean, frequencies, and percentages) were used to describe the
findings. The findings have been presented using charts and tables where applicable.
It was found that economic and technological factors have to large extent been a
determinant in the actions that the hospitals have taken. On the other hand, the political –
legal and socio-cultural factors have been a determinant to a moderate extent.
The other environmental analysis established that knowledge of patients and competitive
activities by the other hospitals to a large extent affect the competitive strategic actions
that the organizations have taken in the last two decades. The other two aspects of
activities of various suppliers in the hospital industry and availability of alternative
medical services were found to a moderate extent affect the competitive strategic actions
that the hospitals have taken in the last two decades.
In a nutshell, it was noted that the hospitals have to a large extent used all the broad
competitive strategies save for one that can be argued has been used to a moderate extent.
Service differentiation strategy was used to a very large extent by most players in this
industry. This was followed by Focus strategy in that most hospitals have remained
focused on the segment that they have served well.
An analysis on the service differentiation strategies adopted indicated that the hospitals to
a large extent have adopted various differentiation strategies/activities in order to remain
competitive. The differentiation strategies/activities that were scored highly included
those aimed at enhancing of the meeting of the customer needs that were scored followed
by employment of high skilled staff, offering unique services at investment in special
technologies and development of unique physical appearance and attention to physical
infrastructure.
Patient diagnostic and treatment costs and remuneration of doctors and other supportive
staff were found to a large extent posing a challenge to the implementation of strategy in
the private hospitals. Other aspects were found to a moderate extent pose a challenge to
implementation of strategy. These included huge investment in capital diagnostic
equipment, shortage of specialist clinicians and high training costs . Competition from
other hospitals, entry by other hospitals and alternative medical care providers were seen
as a challenge to a moderate extent.
Given the focus on private hospitals in Nairobi that has an in-patient bed capacity of
more than 20 beds, this study might not apply to the private hospitals that are involved in
only the provision of casualty services and to similar hospitals that are outside Nairobi.
Further research is recommended to focus on other hospitals of similar nature that are
based outside Nairobi. This is because those hospitals operate under different
environment and have a different customer base in terms of their characteristics.
Citation
MBA Thesis 2012Sponsorhip
University of NairobiPublisher
School of Business, University of Nairobi
Description
Master Thesis