1. Discuss the resource-based view of competitive advantage. Why is it important to understand organizational differences to use this approach?
2. Briefly define what is meant by competitive advantage. Are competitive advantage and sustained competitive advantage identical concepts? Compare and contrast the two concepts.

Professional Development: 

Case Study #12: AIDSCAP Nepal

• Conduct an internal environmental analysis, identifying the value-creating strengths and weaknesses for each value chain component. Model your response after Exhibit 4-4 (p. 144) “Value Creating Strengths and Value Reducing Weaknesses.”
• For each strength, assess the competitive relevance, using Exhibit 4-6 (p. 149) as an example.
• Exhibit 4–4: Value Creating Strengths and Value Reducing Weaknesses for American Healthways, Inc.
• Value Chain Component
• Service Delivery, Pre-Service
• Service Delivery, Point-ofService
• Service Delivery, AfterService
• Support Activities, Culture
• Support Activities, Strategic Resources
• Value Reducing Weakness
• • Limited brand identity • Disease management and care enhancement contracts require extensive selling because of lack of knowledge of key benefits • Revenues subject to seasonal pressures from enrollment processes of contracted health plans
• • Company/employees have less experience in care enhancement programs in expanded product line areas such as end-state renal disease, fibromyalgia, etc. • A majority of company’s revenues accounted for by three health plans
• • Incomplete or inaccurate data could render independent evaluation of clinical interventions useless
• • Acquisition of StatusOne Health System with different culture • Company’s reluctance to declare cash dividend may discourage some classes of investors
• • Hospital contracts decreasing • Cost to maintain IT for compliance with federal and state regulations • High labor costs from competition for staff • Volatility of stock price and trading volume
• Value Creating Strength
• • Customer benefit: care enhancement/disease management concept (attractive to health plans, hospitals, physicians, patients) • Customer benefit developed: geographical coverage (attractive to large health plans) • Six care enhancement centers
• • Successful management of diseases leading to reduced costs and increased customer satisfaction • Company employees highly experienced in implementing care enhancement programs in certain areas, such as diabetes • Integrated care product line attracts broad range of patients • Number of covered lives increasing making economies of scale possible
• • Alliance with Johns Hopkins Health System to independently evaluate effectiveness of clinical interventions
• • First disease management and care enhancement provider in nation accredited by all three accrediting agencies • Highly professionalized culture • Experienced management team of individuals with extensive health care experience and longevity with the company • Conservative fiscal management philosophy: retain earnings for future growth and development • Company has state-of-the-art medical information technology • Company has sound financial position: cash, working capital, stockholder equity increasing over past year • Earnings per share of common stock has increased despite 3:2 stock split in 2001 and 2:1 stock split in 2003.

Exhibit 4–6: Strategic Thinking Map of Competitive Advantages Relative to Strengths in General

Is the Value of the Strength High or Low? (High/Low?)

H

H

H

H

H

H

H

H

Is the Strength Rare? (Yes/No)

N

N

N

N

Y

Y

Y

Y

Is the Strength Easy or Difficult to Imitate? (Easy/Difficult)

E

E

D

D

E

E

D

D

Can the Strength Be Sustained? (Yes/No)

Y

N

Y

N

Y

N

Y

N

Implications

No competitive advantage. Most competitors have the strength and those that do not can develop it easily. All can sustain it. Maintenance strategy.

No competitive advantage. All competitors have the strength which is easy to develop. Strength is not sustainable so it represents only a short-term advantage.

No competitive advantage. Many competitors possess the strength but it is difficult to develop, so care should be taken to maintain this strength.

No competitive advantage. Many competitors possess the strength but it is difficult to develop, and those who do possess it will not be able to sustain the strength. Only a short-term advantage.

Not a source of long-term competitive advantage. Because it is valuable and rare, competitors will do what is necessary to develop this easy-to-imitate strength. Short-term advantage. Should not base strategy on this type of strength but should obtain benefits of short-term advantage.

Not a source of competitive advantage. The strength is easy to imitate and cannot be sustained. Short-term advantage. Do not base strategy on this type of strength but obtain benefits of short-term advantage.

Source of long-term competitive advantage. If value is very high, it may be worth “betting the organization” on this strength.

Possible source of short-term competitive advantage but not a strength that can be sustained over the long run.

Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2013). Strategic Management of Health Care Organizations (7th ed.). San Francisco: Jossey-Bass.