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.