United Hospital Ltd was borne out of a vision to provide a complete and one-stop healthcare solution to the people of Bangladesh. Opening its doors in August 2006 and situated besides the picturesque Gulshan Lake, this hospital is one of the largest private sector healthcare facilities in Bangladesh. With a capacity to house over 450 patients and established across a total covered area of over 400,000 sft, the hospital has 11 state of the art operation theatres to cater to the needs of our varied patient base.

United Hospitals departments of cardiology, gynaecology, orthopaedic and paediatrics are staffed by the most esteemed doctors in their respective fields. As an example, a glimpse at cardiology department would reveal that till date we have conducted over 2300 open heart surgeries and over 8300 angiograms and angioplasty operations. That’s over 12 heart related Surgeries per day alone since our inception.

With the technology and expertise, and with the support of our friendly staff, they strive each day to be the number one healthcare provider, not only within Bangladesh but within the Asia-Pacific region.

 The hospital building is a purpose built facility, accommodating 450 beds in wards, cabins, emergency, ICUs, CCUs, ICCUs and other facilities. The hospital has 6 patient lifts, 2 visitors lift, and 1 VIP lift. They also have secured parking facilities for over 350 vehicles so that the visitors can have a peace of mind when they visit their dear and loved ones or when they come for medical checkups.

United Hospital has 40 consultant rooms and a large number of departments to serve the patients with various ailments including Cardiac, Gynecology, Orthopedic, Neurology, pediatrics, internal medicine, A & E, Radiology, Laboratory, Nephrology, Physiotherapy, ENT, Ophthalmology, and Gastroenterology etc.

 1.1 Methodology

For this project, we collected data from both primary sources and secondary sources. Both the sources are explained below –

Primary Sources:

 A face to face interview questionnaire designed by our honourable faculty Mohammad Moniruzzaman was used to conduct personal interview with Syed Moniruz Zaman, Supervisor CRD.   From this, we got valuable insight i.e. marketing views, visions, and tactical plans about United Hospital Ltd.

 The frameworks or models provided by Mohammad Moniruzzaman (2006) were the tools that we used to analyze and to come up with solutions and the service marketing implications.

 Secondary Sources:

 For secondary research, the website of United Hospital Ltd. has provided much useful information to us.

 1.2 Report Structure:

This report covers all the steps of strategic service marketing plans (Moniruzzaman, 2006) i.e. Strategic analysis, Service strategy formulation, Strategy implementation and Evaluation.

 Chapter 1: Introduction

In the Introduction, all the activities included in this chapter are explained. In the second section the methodology of the project that is mean the data collection techniques used is explained briefly. And lastly the third part involves the report structure that involves all the brief explanation of each subsequent chapter and its contents.  

 Chapter 2: Strategic Analysis

This is one of the most important chapters of this report and contains the strategic analysis of United Hospital by analyzing the resources and capabilities of the Hospital and comparing them with the environmental issues, identifying the potential effects of the compatibility between the environmental issues and the Hospital’s resources and capabilities, analyzing the implications of such compatibility. Below given the list of strategic analysis that we use to determine the strategy:

 Chapter 3:  Services Strategy Formulation

Service strategy formulation is very important for United Hospital Limited’s future prospect. We have identified key success factors (KSFs), and the Favorable/Unfavorable, we formulate services strategies for the United Hospital Limited which discuss detailed in this chapter.

 Chapter 4: Implementation & Evaluation:

In this chapter we have discussed about the plans that are made regarding the successful implementation of these strategies. This chapter contains information which will help the hospital to implement strategic options. After that we discussed about how UHL can evaluate the formulated services.

 Chapter 5: Strategic Plan:

This chapter is all about the results of the strategic services marketing process of United Hospital. We have suggested some strategies to the United Hospital which will help the hospital to achieve their desired goal.

 CHAPTER 2: STRATEGIC ANALYSIS

2.1 Environmental Demands:

According to the framework of strategic initiatives presented to us by our faculty Dr. M. Moniruzzaman, there are four environmental demands, namely:

1. A.    Macro-Environmental Demand
2. B.     Customer Demand
3. C.    Competitor-Specific Demand
4. D.    Company Internal Demand

The strategic services marketing framework entails the analysis of the three types of environmental forces: (i) macro forces; (ii) micro forces; and (iii) internal forces. All the above mentioned four environmental demands can be categorized under these three forces. The macro-environmental demands falls under macro forces; customer and competitor-specific demands falls under micro forces and company internal demands falls under internal forces. All these four major categories of demands fall under the positive model in the framework.

 2.2 Triangular Model:

Exhibit 1: Triangular Model

Capability vs. Orientation

Capability refers to a firm’s ability to respond to environmental demands. Such ability may include financial ability, brand recognition or ability to understand customers. On the other hand, orientation relates to the firm’s willingness or commitment to environmental response. Indeed, for a firm to respond both effectively and efficiently, it must be both committed and able to respond to environmental variables.

 Capability-specific items or measures:

• Sales productivity in currency
• Productivity in terms of current prospects
• Productivity in terms of future prospects
• Amount of time it takes to convert prospects into buyers
• Level of commitment exhibited by a typical buyer
• Ability to accurately qualify a prospect
• Ability to determine a buyer’s wants and needs

These items would use a five-point scale, in which 1 represents ‘very dissatisfied’ and 5 represents ‘very satisfied ’.

 In Context of United Hospital Ltd:

We have calculated the mean for capability of United Hospital from survey data.

Mean: 51/13= 3.9

The minimum cut off level is 4. Therefore, United Hospital does not have the capability to meet up their orientation/ commitment/ willingness. 

 External Customer-orientation

One major determinant of customer satisfaction and retention is the customer orientation of a service firm. Customer orientation reflects the disposition of individuals working in service industries to focus on and meet customers’ needs. Previous research has found customer orientation to be associated with important outcomes such as repurchase intentions, loyalty, and customer value perceptions.

For services firms, a major determinant of customer retention is a satisfactory relationship between customers and service providers. In financial services, satisfaction with the relationship leads not only to increased customer loyalty and retention, but results in greater referrals and reduces clients’ perceived risk and transaction costs. Relationship satisfaction also leads to increased customer commitment. Creating strong, satisfactory relationships with clients involves more than just being skilled in financial services. It involves understanding the ‘whole picture’ of a client and staying connected through open communication. It requires listening, managing clients’ emotional states and tendencies, and ensuring trust.

Empathy has been suggested as being related to satisfaction as well. Enhancing customer relationships may also require investments in technology such as a customer relationship department (CRD) system. The benefits of an effective CRD system include not only higher efficiency but also higher levels of client service, satisfaction, and retention (and ultimately increased profitability). Firms’ central role is to apply emotional intelligence to services planning and manage the relationships with their customers on a deeply personal level. There is some empirical evidence that customer orientation is related to relationship quality in that the use of customer-oriented selling has been found to be related to the quality of the customer – salesperson relationship. Customer orientation has also been empirically linked with a number of important client outcomes such as customers’ perceptions of employee performance, customers ’ perceptions of value, repurchase intentions, loyalty, and word-of-mouth behavior.

Customer orientation-specific measures:

• I find it easy to smile at each of my customers.
• I enjoy remembering my customers’ names.
• It comes naturally to have empathy for my customers.
• I enjoy responding quickly to my customers’ needs.
• I get satisfaction from making my customers happy.
• I really enjoy serving my customers.

• I try to help customers achieve their goals.
• I achieve my own goals by satisfying customers.
• I get customers to talk about their service needs with me.
• I take a problem solving approach with my customers.
• I keep the best interests of the customer in mind.
• I am able to answer a customer’s questions correctly.

 Customer orientation is measured using a 12-item scale. Respondents would be asked to indicate their level of agreement/disagreement with statements such as, ‘I enjoy responding quickly to my customers’ needs’ and ‘I get customers to talk about their service needs with me’. The items use a five-point scale in which 1 represents ‘strongly disagree’ and 5 represents ‘strongly agree’. The scale items, presented above, are averaged across the 12 items to arrive at an overall customer orientation score. Coefficient alpha for the customer orientation measure must be =>.88 to confirm strong internal consistency.

 In Context of United Hospital Ltd:

Customer Advisor of United Hospital:

From capability-specific questions, we calculated a mean of (51/13) = 3.9. The minimum cut off level is 4. Therefore, United Hospital has not required capability to meet up their orientation/ commitment/ willingness.

From the external-customer orientation of customer advisor and CRD of United Hospital, we computed a mean of (291/70) = 4.16. We have taken five interviews on “External Customer Orientation”. Therefore,

Mean: (70+56+60+54+51)/ (14*5) = 291/70 = 4.16

The minimum cut off level is 3. Therefore, United Hospital has strong orientation/ commitment/ willingness to try to help customers achieve their goals.

 Customer Analysis:

• Propensity to Evaluate (PEV):

From the customer analysis segment of the questionnaire, we calculated a mean of 4.78 for Propensity to Evaluate (PEV). Therefore,

Mean: 359/ (5*15) = 4.78

The minimum cut off level is 4. Therefore, United Hospital has strong orientation/ commitment/ willingness to know customer preference.

Image:

We have analyzed the mean of 4.73 for the category of image.

Mean: 71/ (5*3) = 4.73

The minimum cut off level is 4. Therefore, United Hospital has strong orientation/ commitment/ willingness to create positive image compared to other hospital.

 Commitment:

In term of commitment of the clients toward United Hospital the mean is 4.48. Therefore,

Mean: 157/ (5*7) = 4.48

The minimum cut off level is 4. Therefore, United Hospital has moderate orientation/ commitment/ willingness for customer welfare.

 Quality/Reliability:

For quality/ reliability the mean is 4.52. Therefore,

Mean: 113/ (5*5) = 4.52

The minimum cut off level is 4. Therefore, United Hospital has moderate orientation/ commitment/ willingness to deliver quality service for its customers.

 Satisfaction:

For the satisfaction of the health care customers toward the service of United Hospital, the mean is:

Mean: 90/ (5*4) = 4.5

The minimum cut off level is 4. Therefore, United Hospital has moderate orientation/ commitment/ willingness to make the customers satisfied through meeting up their expectations.

 Capability vs. External Customer-orientation

Therefore the capability of United Hospital is not consistent with the customer orientation.

Internal customer orientation

A service company can be only as good as its people. A service is a performance, and it is usually difficult to separate the performance from the people. If the people don’t meet customers’ expectations, then neither does the service. To realize its potential in services marketing, a firm must realize its potential in internal marketing (IM) —the attraction, development, motivation, and retention of qualified employee-customers through need-meeting job-products. With services, internal marketing paves the way for external marketing.

The rationale for the adoption of IM is the increasing recognition of the importance of the employees’ role in the service industry. By treating employees as internal customers, one can ensure higher employee satisfaction and, subsequently, the development of a more customer conscious, market-oriented and sales-minded workforce. More than 20 years ago, IM was first proposed as a solution to the problem of delivering consistently high quality of service. Today the concept is being increasingly discussed in the literature as a strategic tool for meeting and exceeding customers’ expectations.

Several IM definitions have been developed over the years and all have at their heart the notion of viewing and treating employees as internal customers. What follows is a small sample of definitions in order to illustrate the concept’s underlying principles. ‘Internal market of employees is best motivated for service mindedness and customer-oriented behaviours by an active, marketing-like approach, where marketing-like activities are used internally’. IM is defined as:

‘Any form of marketing within an organization which focuses staff attention on the internal activities that need to be changed in order to enhance external marketplace performance’.

IM is also defined as: ‘a planned effort using a marketing-like approach to overcome organizational resistance to change and to align, motivate, and inter-functionally coordinate and integrate employees towards the effective implementation of corporate and functional strategies in order to deliver customer satisfaction through the process of creating motivated and customer-oriented employees’. The logic of viewing employees as ‘internal customers’ is that by satisfying the needs of internal customers, a firm should be in a better position to deliver the quality desired to satisfy external customers. Implicit in this logic is the underlying assumption that the satisfaction of employee needs enhances employee motivation and retention, and subsequently the higher the degree of employee satisfaction, the higher the possibility of achieving external satisfaction and retention.

The companies that practice internal marketing most effectively will: (1) compete aggressively for talent market share: (2) offer a vision that brings purpose and meaning to the workplace: (3) equip people with the skills and knowledge to perform their .service roles excellently: (4) bring people together to benefit from the fruits of team play: (5) leverage the freedom factor; (6) nurture achievement through measurement and rewards: and (7) base job-product design decisions on research.

Exhibit below presents a rating sheet that we have used to evaluate internal marketing capability and orientation United Hospital.

 The above rating device allows you to determine both the capability and orientation (commitment) with regards to your firm’s internal customers’ demands.

In term of United Hospital, they have excellent internal marketers as their total score is 20.

Internal coordination & innovativeness

The inter-functional coordination is the coordinated utilization of company resources & capabilities in creating superior value for target customers. Any point in the buyer’s value chain affords an opportunity for a seller to create value for the buyer firm. Therefore, any individual in any function in a seller firm can potentially contribute to the creation of value for buyers. Creating value for buyers is much more than a “marketing function;” rather, a seller’s creation of value for buyers is analogous to a symphony orchestra in which the contribution of each subgroup is tailored and integrated by a conductor—with a synergistic effect.

If senior managers have a close relationship with current and prospective customers, this indicates a robust inter-functional coordination and if they actively seek and encourage innovative ideas based on research results, they will have an emphasis on innovativeness.

Inter-functional Coordination (N of items=7)

• Our top managers from every function regularly visit our current customers.
• Our top managers from every function regularly visit our prospective customers.
• Our managers understand how employees can contribute to value of customers.
• All of our business functions are responsive to each other’s needs.
• Information about our customers is freely communicated throughout our organization.
• All of our business functions are integrated in serving the needs of our target markets
• All of our business developments are responsive to each other’s requests.

The mean for inter-functional coordination is:

Mean: 29/7= 4.14

The minimum cut off level is 4. Therefore, United Hospital has good orientation/ commitment/ willingness to contribute the value to its customers.

Innovativeness (N of items=5)

• Management actively seeks innovative ideas.
• Innovation, based on research results, is readily accepted in our organization.
• Innovation is readily accepted by management.
• People are penalized for new ideas that don’t work.
• Innovation in our organization is encouraged.

The mean for innovativeness is:

Mean: 16/5= 3.2

The minimum cut off level is 3. Therefore, United Hospital has good orientation/ commitment/ willingness to generate new ideas to sustain in the business.

Overall Capability vs. Overall Company Orientation:

The Mean of capability is 3.9.

The minimum cut off level is 4. Therefore, United Hospital has not required capability to meet up their orientation/ commitment/ willingness.

Therefore Capability of United Hospital is not consistent with Inter-functional Coordination & Innovativeness.

Competition orientation

Competitor orientation means that a firm understands the short-term Fs and Ds and long-term strategies of both the key current and the key potential competitors. Paralleling customer analysis, the analysis of principal current and potential competitors must include the entire set of initiatives capable of satisfying the current and expected needs of the firm’s target buyers.

Competition orientation depends on top management taking a strong interest in competitor actions as well as in responding to such actions if they result in either/or F/D for its own firm.

 Competitor orientation (N of items=12)

• Our firm analyses the assumptions of our major competitors about their own status/position.
• Our firm analyses the assumptions of our major competitors about other firms.
• Our firm analyses the assumptions of our major competitors about customers.
• We regularly analyze competitors’ Ds.
• We regularly analyze competitors’ Fs.
• We always determine the success of our competitors.
• We always determine the failure of our competitors.
• We identify the initial objectives set out by our major competitors.
• We identify competitors’ realized strategies.
• We conduct our ‘relative capability analysis’ to determine our relative F/Ds.
• We rapidly respond to competitive actions that lead to a D (s) for us.
• We target customers where we have an F for competitive advantage.

Competitor orientation (According to United Hospital)

From the data given by the United Hospital we have calculated the mean for competition which is:

Mean: 41/12= 3.4

The minimum cut off level is 4. Therefore, United Hospital does not have strong orientation/ commitment/ willingness to conduct ‘relative capability analysis’ to determine its relative F/Ds.

Competitor orientation (According to LABAID)

From the data given by the LABAID we have calculated the mean for competition which is:

Mean: 50/12= 4.16

The minimum cut off level is 4. Therefore, LABAID has strong orientation/ commitment/ willingness to conduct ‘relative capability analysis’ to determine its relative F/Ds.

 Overall Capability vs. Overall Competitor Orientation

The Mean of capability is 3.9.

The minimum cut off level is 4. Therefore, United Hospital has not required capability to meet up their orientation/ commitment/ willingness.

Therefore the capability of United Hospital is not consistent with the Competitor Orientation.

 Macro orientation

Macro forces affect a firm in various ways. These forces along with the forces discussed above interfere with a firm’s activities. Known as the ‘intervening conditions’, these factors determine a firm’s success or failure. Most firms, particularly, service firms tend to discount significance of the macro-environmental forces and have consequently, suffered both economically and socially. Examples include the airlines industry (after 9/11), the tourism industry in certain countries (e.g., India-Kashmir), and recently, the hotel and the banking sectors (due to global recession).

 Macro orientation (N of items=5)

• Our firm has a formal framework to scan the macro factors.
• We use this framework regularly.
• We are able to identify the macro factors that would affect our firm.
• We use a framework to priorities the macro issues.
• We are able to determine how the macro forces would affect our firm.

The mean for United Hospital’s Macro orientation:

Mean: 20/5= 4

The minimum cut off level is 3. Therefore, United Hospital has strong orientation/ commitment/ willingness to determine the macro forces that could affect them.

Overall Capability vs. Overall Macro Orientation

The Mean of capability is 3.9.

The minimum cut off level is 4. Therefore, United Hospital has not required capability to meet up their orientation/ commitment/ willingness.

Therefore, Capability of United Hospital is not consistent with the Macro Orientation.

 2.3 EFFECT-IMPLICATION-OBJECTIVE-KSF

2.3.1 Customer Analysis:

Propensity to Evaluate (PEV):

Effect:

• Health care consumers are unaware of many of the new services offered by the United Hospital Ltd. As a result client’s retention rate is low.

Implication:

• Customer Relationship Department (CRD) should be developed to identify the clients’ needs.

Objective:

• At least twenty people should be trained within three months.

KSF:

• Train employees.

 Image:

Effect:

• United Hospital emphasizes less on their brand recognition. It increases the probability to lose future prospects.

Implication:

• Promotional activities should be implemented for brand recognition and to attract future prospects.

Objective:

• Emotional appeal and slice of life must be applied in promotion for client retention in the long run.

KSF:

• Brand recognition to increase brand loyalty.

 Commitment:

Effect:

• Client’s commitment to the service of the hospital is very low.

Implication:

• Health care consumer relationship should be developed for retention of loyal customers.

Objective:

• United Hospital should give priority to the patient’s feedback.

KSF:

• Customer retention.

Quality/Reliability:

Effect:

• Any disruption to provide quality service will increase the number of disappointed clients.

 Implication:

• United Hospital should provide high level of quality service to its patients. It will lead to client satisfaction and will increase the number of committed health care consumer.

 Objective:

• United Hospital should regularly inspect their service quality they promised.

KSF:

• Inspect service quality to provide quality service.

 Satisfaction:

Effect:

• Health care consumers are dissatisfied due to lack in providing the level of quality services promised by the hospital.

Implication:

• Client’s expectation from the hospital should be taken in to account.
• Surveys must carry out to learn what clients want from.
• Management team should be trained to identify the problems and respond effectively and efficiently.

Objective:

• Health care consumer research should be conducted.

KSF

• Health care consumer research to understand customers demand.

 2.3.2 Internal customer orientation

Inter-functional Coordination

 Effect:

• Customer’s dissatisfaction increases due to lack in serving the desired demand.

Implication:

• United Hospital should increase the efficiency level of the doctors and nurses.

Objective:

• Increase internal communication of customer relationship department managers.
• Initiate training and development process by collaborating with medical universities.
• Training and development must be initiated in order to train the nurses.

KSF:

• Enhance internal communication to provide better services to the customers.

Innovativeness

Effect:

• Increase the probability to lose market position.

Implication:

• United Hospital should encourage innovativeness to the employees in terms of promotional activities, providing service, resource management and maintenance.

Objective:

• Motivate employees to encourage innovation.
• Separate salary, compensation and benefit packages for the foreign trained doctors and nurses in order to retain them.

KSF:

• Encourage innovativeness to capture market position.

Initiate effective Human Resource Management Policies and Practices

 2.3.3 Competition orientation

Effect:

• Probability to loss current customer and future prospects.
• Services provided by the competitors will capture more customers from United Hospital.
• Competitor’s investment in health care technology will lead to lose competitive advantage in the health care industry.

Implication:

• United hospital should analyze competitor’s initiatives regularly.
• United hospital must compete aggressively for talent market share.

Objective: 

• United Hospital should develop strategy to analyze competitors move.
• High qualified doctors to gain competitive advantage over competitors.

KSF:

• Analyze Competitors’ Actions to determine its current positions.
• Offer adequate salary and compensation packages.

2.3.4 Macro orientation

Effect:

• Lack of technological advancement will hamper the complex services provided by the hospital.

Implication:

• United hospital should develop framework to identify the macro factors that affecting the operation of the hospital.
• United hospital should invest more in health care technology to serve better quality services to the patients.

Objective:

• United hospital should determine how the macro forces would affect their firm by using the framework.

KSF:

• Develop framework to analyze the macro factors that affects the hospital.
• Adapt new health care technology.

 2.4 Comparison Model:

Exibit 2: Comparison Model

Based on our survey on United Hospital we have found out that there is no compatibility between Orientation and Capability of any demands. Therefore, every demand is incompatible.

2.4.1 Key Success Factors (KSFs):

Macro:

1. Develop framework to analyze the macro factors that affects the hospital.
2. Adapt new health care technology.

Competitor:

1. Analyze Competitors’ Actions to determine its current positions.
2. Offer adequate salary and compensation packages.

Customer:

• Propensity to Evaluate (PEV):

1. Train employees.
2. Brand recognition to increase brand loyalty.
3. Customer retention.
4. Inspect service quality to provide quality service.

9.   Health care consumer research to understand customers demand.

• Image:

• Commitment:

• Quality/Reliability:

• Satisfaction:

Company Internal:

• Internal coordination

1. Enhance internal communication to provide better services to the customers.
2. Encourage innovativeness to capture market position.

• Innovativeness

12. Initiate effective Human Resource Management Policies and Practices.

 2.5 Intervening Condition:

Intervening conditions define the overall condition that exists in the environment which might work or favor of the company or create problem for the company.

Economic:

1. 1.      Change in Inflation
2. 2.      Change in Exchange Rate
3. 3.      Change in Interest Rate
4. 4.      Change in GNP
5. 5.      Change in Unemployment

In the analysis of intervening condition, at first we are going to discuss about the economic factors.

Exhibit 1: Matrix for Economic Intervening Condition

1.      Changes in Inflation:

Change in inflation has been rated uncertain for United Hospital as it is health care industry inflation plays a very little role to affect the operation of their service. This is why the impact of economic factors is low on the company.

2.      Change in Exchange Rate:

The status of occurrence for Exchange rate is uncertain in the environment for United Hospital, which impact very low in the firm.

3.      Change in Interest Rate:

Interest rate rarely impact on the operation of the hospital. This is why is uncertain and the impact on the hospital is low.

4.      Change in GNP:

            Change in GNP is uncertain and the impact on the hospital is low.

5.      Change in Unemployment Rate:

Unemployment rate is uncertain and the impact on the hospital is low.

Technological:

1.      Advancement in Technology

2.      Growth in R & D in The Industry

The second division of intervening condition that we are going to discuss is technological factors.

Exhibit 2: Matrix for Technological Intervening Condition

 1.      Advancement in Technology:

Advance in technology is very important intervening for health care industry. Advance in technology will give the competitor to capture the market share. Most of the complex operations are done with the combination of qualified doctors and technology. In case of United Hospital this component has been rated as potential in the status of occurrence and the probability of impact is moderate for the hospital.

1.      Growth in R&D in the Industry:

Research and development is also an important component for hospital. It was rated as potential for the company and the probability of impact on the company is moderate.

Governmental/Political/Legal:

1. Anti-Trust Legislations
2. Ownership Prerequisites
3. Expansion (Branch) Laws
4. Disclosure Acts
5. Advance Legislations
6. Deregulation
7. Political Influence

The third division of intervening condition that we are going to discuss is government/political/legal factors.

1.      Anti-Trust Legislations:

Anti-trust legislations are rated uncertain in the status of occurrence and the impact on the company is low.

Exhibit 3: Matrix for Government/Political/Legal Intervening Condition

1.      Ownership Prerequisites:

Ownership Prerequisites are rated uncertain in the status of occurrence and the impact on the company is low.

2.      Expansion (Branch) Laws:

Expansion (Branch) Laws are rated uncertain in the status of occurrence and the impact on the company is low.

 3.      Disclosure Acts:

Disclosure Acts are rated uncertain in the status of occurrence and the impact on the company is low.

 4.      Advance Legislations:

Advance Legislations are rated uncertain in the status of occurrence and the impact on the company is low.

 5.      Deregulation:

Deregulation is rated uncertain in the status of occurrence and the impact on the company is low.

 6.      Political Influence:

Political Influence is rated uncertain in the status of occurrence and the impact on the company is low.

2.6 Analyze The KSFs With The Phenomenon Model:

2..1         Train employees

• What is going on here?

United Hospital should train their employees.

• Why is it happening? Or what’s its reason for existence?

Customers are not aware of many existing services and new services offered by the United Hospital. This affects the overall process of the service which leads to customer dissatisfaction and decrease the profitability of the hospital. To identify clients need and want and aware the client about the services offered by the hospital, employees should be trained.

• Who/what are involved in it?

Customer Relationship Department (CRD) employees are involved in it. The resources for training the employees for example: expanse, time are also involved in this process. CRD employees communicate directly with the customers or patients. If they lack their capability to provide the service than the hospital will face loss. This is why they are playing a vital role in the overall process of service providing. It will be a good step to train them to learn about the customers demand.

• What are the consequences of its occurrence?

The expected outcomes:

United Hospital expects to provide their client with quality services. Clients will be fully aware of their service. Their demand will be fulfilled.

The actual outcomes:

United Hospital is failing to provide their service to the customer as Clients are not fully aware about the services. This is affecting the service predictability of UHL.

• What is the context in which it occurs?

In the context of customers demand.

• How does it happen?

United Hospital should select CRD employees based on their performance. After that they should arrange training for them.

2..2         Brand recognition to increase brand loyalty

• What is going on here?

United hospital should increase their promotional activities to increase their Brand recognition. Brand recognition will help United Hospital by leaning people toward their hospital while health problems arise.

• Why is it happening? Or what’s its reason for existence?

To increase loyalty among the target customers of united hospital needs strong brand recognition. Strong Brand recognition will help them to retain customers and also to improve brand image and positive word of mouth.

• Who/what are involved in it?

Top level management of united hospital must recognize the importance of brand recognition. To have an effective promotional campaign they could hire ad agency.

• What are the consequences of its occurrence?

The expected outcomes:

With proper promotional activities united hospital can expect that the level of brand recognition will increase. At the same time customer loyalty and preference will also go up.

• What is the context in which it occurs?

It is occurring in the context of competitive market, where competitors are aggressively promoting their brand to increase target customer preference, loyalty and also retention.

• How does it happen?

To capture most of the market share higher brand recognition is must. Brand which has higher recognition can sell them. Like other success factors brand recognition is also started with recognizing customer’s demand. What services really the target customers want to united hospital. Also selecting the target customers are also important in this process.

2..3         Customer retention

• What is going on here?

Commitment of the customers to united hospital is significantly low. Therefore, retention rate is also low. To keep the profitability higher customer retention is an important factor.

• Why is it happening? Or what’s its reason for existence?

Higher customer retention will improve brand image. With higher retention rate will help united hospital to enjoy consistence profitability in the short term as well as in the long term. This will also attract new customers by generating positive word of mouth by the existence customers.

• Who/what are involved in it?

Only by providing superior high quality services united hospital can retain their old customers. So the people who are involved in the process must consist of top level to lower level employees.

• What are the consequences of its occurrence?

The expected outcomes:

The expected outcome of customer retention is higher profitability. Customer will come back for services only if they are satisfied with the services and satisfied customers not only increase the profitability but also help the company to attract new customers.

• What is the context in which it occurs?

In the context of external customer.

• How does it happen?

Customer retention makes it easy for the organization to increase profitability, attracting new customers etc. The process of retaining customers starts with providing high quality services in all the level of the hospital.  And also important to provide superior services consistently.

2..4         Inspect service quality to provide quality service.

• What is going on here?

Disruption in providing quality service will lead to disappoint and dissatisfied customers. United Hospital should have a formal framework to inspect their service quality time to time.

• Why is it happening? Or what’s its reason for existence?

Ensuring quality service is an important measure to retain customers and to increase the level of profitability.

• Who/what are involved in it?

United hospitals quality Management department is related with the task. They have the all the resources to maintain quality service and o innovate new services.

• What are the consequences of its occurrence?

The expected outcomes:

The expected outcome from the quality service management is to increase customer satisfaction, increase customer retention and attract new customers.

• What is the context in which it occurs?

Customer’s demand for high quality services, competitor’s continuous innovation is the main factors to improve and inspect services.

• How does it happen?

By analyzing customer demand for quality services and then matching with companies own capability united hospital improve their services.

2..1        Health care consumer research to understand customers demand.-satisfaction

• What is going on here?

Health care consumers are dissatisfied due to lack in providing the level of quality services promised by the hospital. Therefore, to survive in the long run it is important to find out what customer’s really want.

• Why is it happening? Or what’s its reason for existence?

To retain customers in the long run and to maintain the profitability it is important to find out the customer demand. Otherwise United Hospital can survive in the market.

• Who/what are involved in it?

Top level management has to develop a framework and according to that they should conduct research time to time also they could look out for competitor’s success factors. They also could take expert help from outside their hospital to conduct such research.

• What are the consequences of its occurrence?

The expected outcomes:

In the short term the expected outcome is customer satisfaction leads to higher customer retention in the long run. And smooth profitability in the long run.

• What is the context in which it occurs?

To understand customer is vital for any company in any industry. As a matter of fact customers are always right and should treat like a king. So, understand customers are a major part of business and in the health care services it is crucial to be trusted among the target customers.

• How does it happen?

United hospital’s top management has to conduct a research to find out customers demand.  After gathering the data they should follow a formal procedure to analyze the data and deliver according to that.

2..1         Enhance internal communication to provide better services to the customers.-inter fun

• What is going on here?

Increase internal communication of customer relationship department managers to avoid customer’s dissatisfaction that increases due to lack in serving the desired demand.

• Why is it happening? Or what’s its reason for existence?

It is important to have proper inter-functional coordination among different department to provide solid services. Otherwise there are possibilities not to provide promising services.  Also to reduce conflict among different and to provide timely service it is important.

• Who/what are involved in it?

Doctors, nurse, boys also the management all are involved in this process.

• What are the consequences of its occurrence?

The expected outcomes:

The expected outcome is to provide superior services and satisfaction, increase loyalty among customers.

• What is the context in which it occurs?

In the context of internal communication.

• How does it happen?

Top management of United Hospital should develop the culture of friendly work environment. Also the doctors, nurses could take initiative to develop and practice such process.

2.6.7 Encourage innovativeness to capture market position

• What is going on here?

United hospital should encourage their employees to increase their innovativeness in providing the service.

• Why is it happening? Or what’s its reason for existence?

Lack of innovativeness in the organization will give the competitors an advantage to capture the clients from United Hospital.  It will affect the company’s overall service providing process, which will lead to customer dissatisfaction and decrease in market share.

• Who/what are involved in it?

Employees responsible for providing the service, employees responsible for promotional activities and resource planning and the customers are involved with the process.

• What are the consequences of its occurrence?

The expected outcomes:

United hospital is expecting to attract new prospect by promoting their services in an innovative way.

The actual outcomes:

Competitors are attracting more prospects by providing their service in innovative ways.

• What is the context in which it occurs?

In the context of internal customer innovativeness.

• How does it happen?

Motivate employees to encourage innovation.

Separate salary, compensation and benefit packages for innovative employees.

2..1         Initiate effective Human Resource Management Policies and Practices.

• What is going on here?

United Hospital should initiate effective Human Resource Management Policies and Practices.

• Why is it happening? Or what’s its reason for existence?

Effective Human Resource Management Policies and Practices will ensure the quality of service in the organization.

• Who/what are involved in it?

Employees from Human Resource Management.

• What are the consequences of its occurrence?

The expected outcomes:

                        Provide service efficiently and effectively.

The actual outcomes:

Expected outcome is not fulfilling as competitors are capturing their clients by offering more flexible service.

• What is the context in which it occurs?

In the context of internal customer innovativeness.

• How does it happen?

-Motivate employees to encourage innovation.

-Separate salary, compensation and benefit packages for innovative employees.

2..1         Analyze Competitors’ Actions to determine its current positions.

• What is going on here?

United Hospital should analyze competitor’s action.

• Why is it happening? Or what’s its reason for existence?

United hospital can determine its position analyzing competitors action, based on which they will take initiatives.

• Who/what are involved in it?

Employees of United Hospital.

• What are the consequences of its occurrence?

The expected outcomes:

                        United Hospital will capture the maximum market share.

• What is the context in which it occurs?

In the context of competitors action.

• How does it happen?

Analyze competitors F/D.

Use framework to manage the services to be provided.

Analyze competitor’s assumption.

2..1         Offer adequate salary and compensation packages

• What is going on here?

United Hospital should offer adequate salary and compensation packages to the qualified doctors.

• Why is it happening? Or what’s its reason for existence?

Competitors can gain advantage by hiring qualified doctors.

• Who/what are involved in it?

Management of United Hospital and the Doctors.

• What are the consequences of its occurrence?

The expected outcomes:

Expecting to capture more prospect than the competitors.

• What is the context in which it occurs?

In the context of competitors action.

• How does it happen? [This refers to the process that includes a sequence of steps]

Hire high qualified doctors to gain competitive advantage over competitors.

2..1         Develop framework to analyze the macro factors that affects the hospital

• What is going on here?

United Hospital should develop framework to analyze the macro factors that affects the hospital.

• Why is it happening? Or what’s its reason for existence?

Macro factor are very important for any organization. Advance in technology or investment in R & D sector will help the hospital to gain competitive advantage. These factors will help the health care organization to step ahead from its competitors.

• Who/what are involved in it?

Management of United Hospital Ltd.

• What are the consequences of its occurrence?

The actual outcomes:

The impact of technology and R & D is moderate in United Hospitals.

• What is the context in which it occurs?

In the context of Macro factors.

• How does it happen?

UHL should encourage its management to analyze its macro factor regularly.

2.6.12Adapt new health care technology.

• What is going on here?

United Hospital should adapt new health care technology.

• Why is it happening? Or what’s its reason for existence?

Advance in health care technology will promote competency of the UHL. It will create a demand for the customer; this will lead to attract new prospects.

• Who/what are involved in it?

Management of the United Hospital Ltd.

• What are the consequences of its occurrence?

The expected outcomes:

                        Customers are expecting to get upgraded services from UHL.

• What is the context in which it occurs?

In the context of macro factor.

• How does it happen?

Invest more in health care technology.

Train the employee to deal with the technology.

Create a maintenance team to maintain the technology and overcome any problem within short time.

3.1 Service marketing strategies

Service firms do implement two kinds of marketing: (i) internal marketing; and (ii) external marketing. Indeed, the premise is to align internal marketing strategies with the external marketing strategies for organizational success.

The aim of a service firm is to create a service brand. Differentiation of such service brand is however complex and demands a high degree of internal marketing. There is no doubt that engaged and satisfied employees are more likely to deliver a consistently positive service experience. Research suggests that employees are increasingly key to developing sustainable service brand differentiation, not only through the development of a consistently positive service attitude, but also through the emotional values that tend to be evoked by a particularly distinctive style of service. It is generally agreed that these intangible brand characteristics are far more difficult for competitors to copy than the operational components of a service brand experience. Functional differentiation is still an important factor in driving competitive advantage, but the lead time before you are copied by a competitor has become increasingly narrow. Even if you create a completely new operating model, as Easy succeeded in doing in the airline business, it is only a matter of time before competing companies, like Ryan Air, start beating you at your own game. If you study the success of the most successful service brands, the most obvious point of similarity is the stress they place on the role their people play in delivering a distinctive brand experience. In his recent study of the ‘Starbucks Experience’, Joseph Michelli commented:

‘ While seemingly endless details go into producing the emotional bond that loyal Starbucks customers feel, often the most important aspect of this bond is the personal investment of Starbucks partners [employees]. ’

The recognition of the significance of people inside has resulted in a two-dimensional brand proposition.

Figure: Two-dimensional brand proposition 

The two dimensions of brand proposition include: (i) Internal customer (Employer) brand proposition; and (ii) External customer brand proposition.

3.1.1 Internal customer (or employer-driven) brand proposition (or generally, Internal marketing)

Internal marketing is a general terminology. The internal marketing (or internal customer) paradigm must incorporate both internal marketing (‘outside-in’) and internal branding (‘inside-out’) practices. Additionally, employer brand proposition must embed brand ethos.

Outside-in (Internal marketing)

The task of ensuring employees understand the brand promise and their part in delivering an on-brand customer experience has generally been described as internal marketing (IM). The most consistent theme of IM has been motivating customer focus. The primary objective of IM is instilling ‘service-mindedness and customer-oriented behaviors’, focusing ‘staff attention on the internal activities that need to be changed in order to enhance marketplace performance’ and ‘creating motivated and customer-oriented employees’. This ‘outside-in’ approach to IM focuses on communicating the customer brand promise, and the attitudes and behaviors expected from employees to deliver on that promise. While it is clearly important for employees to understand their role in delivering the customer brand promise, the result can often be short-lived if employees feel they are no more than a ‘channel to market ’. If the brand values on which the service experience is founded are not experienced by the employees in their interactions with the organization the desired behaviors will ultimately feel superficial, ‘a show put on for customers’ rather than the natural extension of a deeply rooted brand ethos. The aforementioned forces have led to the evolution of internal branding or ‘inside-out’ marketing.

Inside-out (Internal branding)

Over the last ten years there has been a shift in emphasis from IM to internal branding, which takes more of an ‘inside-out’, value-based approach. Internal branding seeks to develop and reinforce a common value-based ethos. Research shows that companies with consistent, distinctive and deeply held values tend to outperform those companies with a less clear and articulated ethos. The ‘inside-out’ view suggests that the distinctive cultural characteristics and capabilities of the organization are the only sustainable route to competitive advantage in that everything else is open to inspection and copying.

The focus of employer brand thinking is to ensure that the same clarity and coherence is applied to defining and managing the organization’s proposition to employees as it typically applies to defining and managing the external customer brand proposition. Employer brand proposition needs to clarify what prospective and current employees can expect from the organization in terms of rational and emotional benefits. However, it also needs to clarify what will be expected of employees in return. United Hospital Ltd promises employees that it will help them realize their potential. In return (in accordance with UHL’s core values) it expects employees to ‘take on big challenges and see them through’. Inherent in employer brand proposition is a ‘give’ and a ‘get’ that aligns the employer brand promise with the customer brand and corporate performance agenda.

3.1.2 SPECIFIC ACTIONS TO IMPLEMENT INTERNAL (EMPLOYER) SERVICE BRAND PROPOSITION

In customer brand experience, if you want to deliver a consistent on-brand service experience, it is not just a question of managing your communication channels; you need to manage every significant operational and interpersonal ‘touch-point’ with the customer. While the employee experience is far more complex than any service experience, there is a recognition that organizations benefit from adopting a similar approach. This is the essence of the ‘employer brand experience’ framework. People management involves a wide range of ritualized processes and HR ‘products’ that can be described as employee touch-points. The term ‘customer corridor’ used to describe a relatively predictable sequence of ‘touch-points’ can equally be applied to the recruitment process, orientation, employee communication, shared services (including HR and facilities management), reward, measurement (e.g. employee engagement surveys), performance management and employee development. Likewise, core values and competencies can be seen as a framework for governing the everyday experience of employees through the communication and behavior of their immediate line managers and corporate leaders.

As for the external customer experience, being consistent is good, but being both consistent and distinctive is even better. If you want to deliver a distinctive customer brand experience, and that experience depends heavily on interpersonal interactions, then you need to ensure your employer brand attracts the right kind of people and your employer brand management reinforces the right kind of culture (from the customer-facing frontline to the deepest recesses of every support function). To ensure your culture is aligned with the desired customer brand experience, it clearly helps to have a distinctive ‘brand of leadership’, but it is equally important to ensure that your people processes are also distinctively in tune with your brand ethos. These ‘signature’ employer brand experiences will help to engender a distinctive brand attitude, generate distinctive brand behaviors and ultimately reinforce the kind of distinctive customer service style that will add value to the customer experience and differentiate an organization from its competitors.

FIGURE: EMPLOYER SERVICE BRAND EXPERIENCE FRAMEWORK

3.1.3 THE INTERNAL MARKETING PROCESS (A CONCEPTUALISED FRAMEWORK):

This process should involve four major steps.

1. Creating the notion of ‘internal customers’: viewing employees as ‘internal customers’.

The notion of viewing employees as ‘internal customers’, which is at the heart of the IM practice, would help a firm to demonstrate a caring attitude aimed at motivating employees to be customer and service oriented in order to attain corporate goals. Employees need to be treated in a caring way by their superiors and the organization in order to feel valued. Successful implementation of IM would enable managers to demonstrate a caring attitude towards their subordinates that will in turn motivate employees to demonstrate positive attitudes towards the external customers.

If the IM ideas are successfully implemented then managers won’t have to persuade their subordinates to develop positive attitudes towards the external customers. Because, the IM ideas suggest that in order to take care of your customers, you must first take care of those who take care of the customers hence, your employees. Happy and satisfied employees create happy and satisfied customers. Employee feelings of satisfaction will reflect on the level of service delivered to internal and external customers. Successful service provision is dependent on interpersonal exchanges between service personnel and subsequently, between the provider and the customer.

Staff must engage in service encounters to satisfy the needs they have in the course of carrying out their job responsibilities. These internal service interactions may include relationships between customer-contact staff and back office personnel, managers and the customer-contact staff, managers and back office personnel and in large organizations between the head office and the branch network. Hence, the provision of good internal service to employees is crucial to the overall success of an organization.

2. Service standards: meeting customers’ expectations

Internal standards are another important element of the IM programmes. Service organizations must set high standards of performance and equip employees in order to enable them to meet and exceed these standards of performance. The firms must set desired levels of quality for the internal service encounters.

Examples of the service standards set up by hospitals in the Bangladesh in terms of the quality of service and the quality of service delivery are: responding to customer enquiries and complaints without delay, answering phone calls within three rings and being friendly and polite with their internal and external customers. Periodic performance reviews and assessments are then carried out in order to identify problem areas. The hospitals studied set up the standards of performance on the basis of the industry-wide performance indicators, which provide information in terms of quality and sales performance. The effective implementation of IM highlights the importance of helping personnel to become more customer focused and service oriented by, for example, setting down clearly defined individual targets such as responding to service delivery failures quickly, adapting to customer needs and requests and responding to problem customers politely.

By tying the personal targets to the organizational goals of customer focus and service orientation, individuals would see their own contribution to the achievement of the organizational goals. This would help firms to instill a strong service mentality with the aim of building and differentiating the corporate brand.

3. Training and development programme: shaping employee behaviours

There is a close relationship between the IM practice and the development of customer focus and service orientation. IM must be implemented within a firm in order to create a motivating and service oriented working environment that will enable the organization to effectively deliver high-quality customer service as a means for developing a strong corporate brand.

Firms must use development programmes as an integral part of the IM practice that emphasizes customer focus and service orientation. The programmes, which may be labeled by firms, customer care and/or service programmes, must be aimed at instilling a customer/service ethos. The training and education courses must aim to help staff to understand the importance of striving to meet the internal service standards in their internal interactions as a prerequisite for achieving high-quality customer service. The overarching aim must be to develop a strong service mentality that will pervade the entire organization.

In the BD, Hospitals use education programmes, which are the principal tool of training and development, in order to create knowledge and understanding among staff of how their attitudes and behavior towards customers form an integral part of the overall service offering. Many of the educational and training programmes are launched and managed by the head office, and are aimed at enabling staff to accept that customer orientation starts from within. Everybody is encouraged to accept that they have internal customers to serve. These internal customers are their colleagues who work in different positions within the firm such as back office personnel, customer contact employees as well as the employees who work in the internal support departments. Employees take the role of internal service providers and internal customers in all their daily internal service encounters. In essence, hospitals appear to use HR development in order to potentially change staff attitudes to the organization’s advantage. The hospitals use HR development in order to improve staff competencies, such as determining the external customers’ needs and matching them with the right products in order to improve customer service. This will enable employees to become more efficient and effective in their role as service providers and will consequently, increase customer satisfaction.

Few guidelines on training and development:

1. Be guided by data. Use employee and customer research data to determine what skills and knowledge to teach. For example, companies can learn more about employees’ perceived skill and knowledge deficiencies, as well as their interests, by offering employees some “tuition credits” to spend on in-house courses of their own choosing. Companies can also use employee surveys and locus group interviews to identity learning priorities. Two critical, open-ended questions to ask employees who complete a course are: “Did you learn what you need to perform your job well?” and “What topics were not covered that you wish had been covered?”

Customer service expectations and perceptions data are also important in revealing subject and skill areas requiring greater attention. Customer surveys that indicate important service dimensions on which the company is perceived to be deficient clarify the learning priorities.

2. Use a mix of learning approaches. Use multiple learning approaches, such as classroom instruction, role playing, and self-instructional programming; no single approach fits all needs and people. Be bold and creative.

3. Use role models. Invite the most credible executives to be instructors in company courses.

Put them in the position to share their expertise and model their values and style. Also invite successful peers to be instructors and session leaders.

4. Institutionalize learning. Devote part of regular staff meetings to skill and knowledge development. Distribute selected articles, videos or other educational materials systematically. Take employees on field trips to visit other companies and then ask them to share with each other the best and worst of what they saw.

5. Evaluate and fine-tune. Administer multistage evaluations of skill and knowledge development efforts. Find out from employees and their managers what on-the-job changes have resulted from participation in a learning program. Evaluate at several different times after the program has ended, for example-, after one and three months.

4. Rewards: motivating employees

As part of the IM initiative a firm must align corporate and individual goals via a formal rewards system in order to instill confidence that the extra energy that individuals voluntarily invest will be reflected in their performance appraisals and their rewards. Firm must offer both tangible and intangible rewards for reaching organizational goals and creating as well as nourishing a sense of ownership. It is stipulated that employees who feel as part-owners of an organization are more willing to work towards sustaining the corporation’s success, as they have more to gain. It can be proposed that rewards can motivate employees to deliver the brand’s promise to external customers.

There must be a strong emphasis on the use of monetary rewards especially for front line employee (e.g., branch managers included).

Hospitals in the Bangladesh reward employees with respect to the opening of new accounts and sales achieved against set targets. But they also reward based on whether employees have retained customers. The monetary rewards take the form of bonuses and short-term commissions. Lab Aid or Apollo has launched personal bonus schemes for staff with sales responsibility. Thus, the front-line staffs have more opportunities to obtain monetary rewards than the back-office staff. The key reason for this is that hospitals tended to link monetary rewards to quantitative targets such as services figures. Since only customer-contact personnel have sales targets, only they have an opportunity to obtain these rewards. Not every employee has equal professional contact with outside customers and prospects. This leads to possibilities of unfairness in incentive awards. While customer-contact personnel receive monetary rewards for achieving their personal targets, back-office personnel are offered prizes for the achievement of their targets. The only exception being the bonus divided among all branch employees for the achievement of the overall targets.

Monetary incentives are an important element of the IM practice in motivating branch managers and customer-contact personnel to achieve their quantitative targets. The successful achievement of the targets holds important implications for a manager’s or sales person’s identity and competence within an organization that could motivate them to break away from the team. The ‘attractiveness’ of the monetary rewards could also have the same result. Gradually, this approach could lead to the customer-contact personnel even assuming a higher status than support personnel within the organization, which may lead to internal conflict with a detrimental impact on the service climate. The reward system discourages team building by rewarding individuals and divides people by creating status difference. Another problem with using this method is that a customer-contact employee who aims to maximize his/her commission earnings is often not concerned with the quality of the service-production/delivery process and thus, not in a position to maximize customer satisfaction and thereby secure repeat business.

Few Guidelines on Rewards:

Here are several reward-system guidelines:

• Link rewards to the firm’s vision and strategy. Reward performance that moves the firm in the intended direction.

• Distinguish between competence pay (compensation for doing one’s job) and performance pay (extra rewards for outstanding performance).

• Use multiple methods to reward outstanding performers, including financial rewards, non-financial recognition, and career advancement. Consider the possibilities of rewarding employees with stock and making them owners.

• Remember the power of a pat on the back. Rewards need not always be elaborate or expensive: the sincerity of the recognition is most important.

• Compete for the sustained commitment of employees. Develop enduring reward systems and use short-term programs such as sales contests sparingly or not at all.

• Stress the positive. Use reward systems to celebrate achievement rather than to punish.

• Give everyone a chance. Avoid the trap of rewarding people in some positions (for example, field salespeople) but not in other positions (for example, secretaries).

• Reward teams and not just individuals. Reinforce team play with team rewards, while also rewarding superior individual performers.

3.1.4 External customer brand proposition (or generally, External marketing) initiatives

A hospital is a service based organization. A dedicated hospital should serve the actual needs and wants of a patient.  A hospital has some characteristics in which they can identify the emotional and functional attributes of a patient .There are some external marketing activities in which a hospital should use to retain its potential customers. Service is the main success factor of a hospital. If a hospital can satisfy the patient’s desire and ensure comfort they can charge premium price for that service. There are some external marketing activities for a hospital which can be described as follows:

The roles of external marketing activities are: (i) acquisition; and (ii) retention of customers.

Successful service firms use both traditional marketing (and transactional marketing) and relationship marketing initiatives to attract and retain their customers.

Target marketing or selection of suitable segments is the first external marketing activity irrespective of whether a firm adopts traditional marketing or relationship marketing or both.

¤ Selecting targets

We recommend four generic ways to segment customer bases to our firm: (1) segmentation based on combining relationship revenue and relationship cost; (2) segmentation based on relationship volume; (3) segmentation based on customer relationship profitability; and (4) segmentation based on combining relationship volume and customer relationship profitability.

1. Segmentation Based on Relationship Revenue and Relationship Cost:

By using relationship revenue (RR) and relationship cost (RC) we can create a simple two dimensional grid (see also Shapiro et al. 1987) into which customers can be positioned. In Figure below we offer one possible solution on how to group customers. Customers can be grouped into four clusters of customers: Group I consists of profitable customers, with high RR and small RC. Based on our understanding of the structure of RR and RC we can expect these customers to be passive customers with fairly big relationship volume and limited transaction behaviour. The customers in this quadrant are probably customers towards whom the hospital needs to adopt a defensive strategy. The basic aim of the defensive marketing strategy would be to reduce customer exiting and switching. In this context our firm can achieve a large portion of revenue by serving these potential customers. Usually there are some fixed patients those who are loyal to the hospital. These groups of potential patients are the profitable customers. They generate high relationship revenue and reduce the relationship cost. For example cardiac patient are the typical example of profitable customers of our hospital. The hospital charges a big amount of money for open heart surgery.  We identified these group of customers maximizes relationship revenue and minimizes the relationship cost. To retain this group of customer hospital should take initiatives including cash discount, festival discount, annual picnic, fieldtrip and raffle draw prize offering.

Group II consists of customers with high RR and high RC. This group includes both profitable and unprofitable customers. The customers are probably active customers with high relationship volume and many interactions with the hospital. Their frequent contact with the hospital presents many possibilities to affect their behavior. As their RC are high, at the same time they represent a major potential; by changing the behavior of the unprofitable customers, the customer base profitability can be greatly improved .Our hospital should try to change the behaviour pattern of this unprofitable customers. For example there are some patients those who have confusion about our hospital. There mind is not set to which hospital is good. Motivating can be a success factor in which they will behave positively to our hospital. If we motivate accurately and successfully they will come to our hospital and became our profitable customer.

Group III consists of customer with low RR and small RC. This group, too, includes both profitable and unprofitable customers, but as their RR is limited they do not represent the same kind of profitability potential as the customers in group II. The hospital would need to know the possibilities for increasing the customers’ patronage concentration. For those customers who do not represent a major potential by becoming full customers, the only solution is to decrease the demand for interactions and simultaneously increase relationship fee revenue. So our firm will give less importance to these customers rather than Group2 customers. As their relationship revenue and relationship cost is low firm should increase relationship fee to overcome the low relationship revenue.

Group IV consists of unprofitable customers, with low RR and high RC. These customers are probably not partial customers; more likely the customers in this group are low net worth customers who are still active. The proportion of younger customers in this group might be expected to be high. For example teenage customers don’t spend largely. Rather they always try to minimize the relationship revenue. But our firm spend a lot for retaining them. My recommendation is to decrease the relationship cost.

The grouping of customers presented above is static and therefore requires an additional analysis in which customers are followed over time so that migration patterns can be identified. Migration patterns are important when it comes to following both profitable and unprofitable customers. In analyzing migration the interest should focus on the turnover of customers, i.e. the defection rate, the migration of unprofitable/profitable customers, and the degree of migration. The more migration there is in the customer base, the more sensitive customer base profitability is likely to be. There should be a separate database in computer in which we will determine the migrating customers. If the migration rate is high profitability will decrease. On the other hand if the migration rate is low profitability will increase. We will try to minimize of turnover of customers. We will try to retain our profit as well.

2. Volume-based Segmentation:

The simplest and the most popular way to segment hospital customers is volume-based segmentation. The basic idea is to use some sort of volume indicator (service volume, medicine volume, a combination of both, or some other volume indicator) to generate groups. Most commercial hospital have employed volume-based segmentation at least in order to find target groups for “private hospitalizing” activities. The volume indicators have usually been customer holdings in the hospital in the form of service and relationship activities. These customers are related to as “high net worth” customers.

Developing a differentiated strategy based on relationship volume may be a good solution as it is obvious that the hospital’s ability to help the customer to produce value for her/himself is evaluated using totally different criteria among high volume customers compared to low volume customers. High volume customers could be expected to be much more interested in how the hospital helps the customer to manage her/his problems whereas the low volume customer is probably more interested in the payment brokering services of the hospital. The customers those who have been living long for treatment in the hospital can be a example of a volume based customer. Or customer using more medicine for treatment can also be a volume based customer. These customers are profitable and loyal to our hospital.

3. Profitability-based Segmentation

The third possible way to segment the customer base is to base the grouping directly on customer relationship profitability. There are two basic approaches to do this: to base the grouping on relative profitability (relative to the total customer base) or to group customers based on their absolute profitability. Grouping customers according to their relative profitability in practice means that the customers are grouped based on their importance for the profitability of the total customer base. The customer base may thus be grouped in, for instance, four groups. Group A consists of the 20% most profitable customers, group B consists of the next 30%, group C of the next 30% and group D of the 20% that are the most unprofitable.

Based on the segmentation we can determine that group A consists of the customers that the hospital has to defend against other competitors, the basic idea being to increase relationship strength. Customers in group D are obviously customers that have to be evaluated against the possibilities to dramatically improve their profitability. Groups B and C are groups with which the basic idea has to be to influence both an increase of in relationship revenue and a decrease in relationship cost.

Creating segments based on the customers’ absolute profitability is the second alternative. The number of segments is of course a question of judgment. We have to judge correctly and accurately to identify our groups of customers. A hospital can increase their profitability by segmenting the customers. For this group of customer the hospital can give services in each group according to their respective profit. There are four groups of target customers Group A, Group B, Group C and Group D. Group A customers are loyal and profitable customers. Groups B and Group C customers are profitable but not like Group A. We recommend to an increase in relationship revenue and decrease relationship cost. The hospital should increase the relationship revenue from the group D by creating more value to its customers. Group D customers generate has a minimum amount of profit.  The patients of a hospital can be classified by these four groups. In this we segment the target market by profit base.

4. Segmentation Based on Relationship Volume and Relationship Profitability:

The fourth way to segment customer bases is to combine volume-based segmentation and profitability based segmentation. In Figure above we have depicted four different groups of customers that can be identified based on combining relationship volume (RV) and customer relationship profitability (CRP). The groups can be characterized as follows: Group I consist of low volume, unprofitable customers. Customers in this group are unprofitable because of their unfavorable transaction behavior in combination with their low volumes. The only way — in the short term — to improve the profitability of the customers that have concentrated all their RV in the Hospital in question and still are unprofitable is to concentrate development efforts on their transaction behavior, to change the behavior and/or price of the transactions that create the problem in order to get more relationship fee revenue. This group of customers should be minimized as their quantity is low and unprofitable customers.

Group II consists of low volume, profitable customers. Most of these customers are doubtless “passive” customers, i.e. customers with limited transaction behaviors. This can be a result of one of two things: they use the Hospital in question as their second or third hospital and thus generate their services in the hospital where they have a very their limited need for services they want.  This type of group of patients should be increased as much as possible. As their quantity of patient is less but they have a big amount of transaction with the hospital and probably they are the profitable customers.

Group III consists of high volume, unprofitable customers. These are the “dogs” of the customer base. Customers in this group may be unprofitable either because of unfavorable pricing or because of excessive usage of low-priced or gratis services. Thus the strategies towards this group may have to vary significantly based on the reasons for the poor performance of the customers in the group. As the customers in this group are high volume customers there may be a notable profit potential in managing to influence the factors decreasing the performance of the customers and this type of patients using the hospital in a small scale.

Group IV consists of high volume, profitable customers. These are the “cash cow” customers of the hospital. Most of these customers are among the first quartile in the profitability and thus the hospital is very dependent of this group. Defections in this group may seriously damage the profitability of the total customer base. A key question is whether to settle for the present levels of profitability or to seek to improve the situation by increasing volumes, improving pricing, and/or changing buying behavior. The patient under this group maximizes the amount of profit as they cover most of the market share.

 ¤ Managing the Service with Supply and Demand

Because of increased competition, a reduction in hospital profitability in traditional areas of business, high cost structures and the fact that some existing customers may now be unprofitable (for example, those who use the hospital in a limited basis), our hospital needs to become more focused on managing the service. A service organization offers a core set of features that represent its ability to satisfy certain basic needs of the customer and augmented features that associate it with a particular supplier, differentiate it from competing services and make it distinctive. To achieve effective supply management organizations may concentrate on service profitability (and success measures such as enhanced market share) and/or objectives that focus more on the individual customer.

In managing the service effectively our hospital can focus on generating individual service profitability through the core service and/or achieving individual customer profitability through an augmented service. Linking these dimensions, by focusing on the core service and improving its profitability, individual customer profitability can be enhanced through the cross-selling of augmented services. A hospital must meet the demand of a patient with providing the best services .If necessary the hospital has to buy equipments for giving better services to its patients. For example buying a CT scan machine helps to achieve the hospital for providing better service. When a firm matches with the demand of a patient then that particular patient will not go to other hospital. They became the regular patients to that hospital. When they became regular patients they will pay to achieve the best service and as a result firm’s revenues will also increase.

¤ Controlling Quality and Service Orientation

With increased competition, technological advancements and changing consumer dynamics our hospital needs to become more adept at controlling quality. For example, due to traditional high cost delivery/operating structures and the lack of scale economies derived from the historical business of hospitalizing, retail hospital are now operating with some of the highest customer service orientated firm.

Consequently, in competing against providers that have lower costs and different types of cost structures managing quality and productivity has become increasingly important for modern hospitals. In managing quality our hospital can focus on technical quality (through ‘intangibilising’ the service) and/or functional quality (by managing the intangible dimensions of the service such as people and processes). Improvements in service quality are viewed not as a cost but as an investment. Linking with the focal aspects of managing supply and demand, in terms of controlling quality and better service.

Our hospital can focus on technical quality and service orientation (by emphasising the intangible aspects of the service offering) and/or functional quality and individual customer orientation (by emphasizing the way in which the service is delivered to customers). Again in focusing on these aspects the hospital can employ a wide range of marketing activities.

Controlling the quality is a major issue in today’s competitive world. There are many hospitals in our country. So if a firm doesn’t maintain quality it will lose its customer’s. Proper implication of technological advancement can lead to reach the actual target. In respect to a hospital quality control mean to recruit qualified doctor, proper nursing strategies, to have the write treatment, giving the write medicine for any disease etc. Technological advancement and skilled human resource has a positive effect on quality control. We recommend hiring skilled labour force and also the medical equipments that create resulting added value to the patients.

¤ Managing Customers’ Orientation with Our Hospital

With increased dynamism in the service sector retail hospital have also been forced to evaluate the way they deliver services and the nature of interactions they have with patients. Much of the research on the encounters between the service organisation and its customers refers to the dyadic direct interactions between a customer and the organisation’s staff. In addition to these one-on-one interactions there are now more indirect interactions where the customer interacts with dimensions such as the service, the service firm’s distribution channel and the communication/promotional efforts of the organization. Thus in managing customers’ interactions our hospital can focus on indirect interactions, (where the customer interacts with intangible dimensions such as the service as a result of a broad spectrum of marketing activities and/or direct interactions (where the customer interacts with the people employed by the hospital).Interaction with the patients by a staff of a hospital can play a major role in managing customer orientation. The hospital must depict that there hospital is the best one. The staff must convey to deliver the message and interact with a friendly way so that customer’s expectation has been fulfilled. The patients must assure that they are in the write choice where they can feel like a home. These are known as the customer service orientation by a hospital. The orientation must be positive and assuring to give the best comfort to the client.

¤ Managing Customers’ Expectations

With increased competition, technological advancements and changing consumer dynamics our hospital needs to be adept at managing customer’s expectations. Customer’s expectations consist of technological and psychological aspects of service delivery. Technical aspects and instrumental expectations can be met through delivery of the intangible elements of the service while functional aspects or psychological dimensions pertain more to the delivery of intangible dimensions. Thus in managing customer’s expectations our hospital can focus on the technical aspects and customers’ psychological expectations which are provided by the intangible dimensions of the service and/or the functional aspects and customers’ psychological expectations which are met by delivering more intangible dimensions of the service. So the scope and range of marketing dimensions involved in supporting customer’s expectations can again be viewed as a wide spectrum. To meet the customer’s wants and needs a hospital should concentrate on customer’s expectation. By meeting up with customer’s expectation a firm can reach the goal. It is important to cope up with the environment to ensure proper service to a customer. If a firm fails to meet up the customer’s needs they will lose the market share and hence the profitability drops. Managing customer’s demand is challenging. Customer may ask for service at anytime. So it is responsibility of a firm to meet up the wants and needs of a patient and give direction accurately and responsively. Meeting up all the demand of a patient a firm will be a customer oriented organization which is necessary to sustain of a firm in today’s competitive world.

In the context of our hospital, we may use a continuum of marketing activities that range from the so called traditional transactional elements of service, through elements of mass communication, sales promotion, publicity and sponsorship and personal communication, to the service delivery or relational aspects of people, processes and service orientation evidence provided.

As indicated in the model the vertical axis incorporates the marketing challenges and places this against a horizontal axis incorporating the continuum of marketing activity described above. The resulting matrix creates a multiplicity of cells that pertain to different aspects of marketing activity that we recommend to our hospital. While these activities are integrative and as such need to be managed in a holistic fashion certain areas of the matrix are more appropriate in achieving particular objectives than others (this is discussed in the following sections).

¤ Use of Core Transaction Marketing Activities

Hospitals are now confronted with the challenge of developing appropriate marketing activity to ensure ongoing customer recruitment. With increased dynamism customer recruitment is important in reducing costs, maintaining and enhancing profitability and increasing market share.

A hospital must achieve its target customers in order to get the maximize profitability. For this purpose hospital has to do a lot of transaction marketing activities and must be given in proper direction techniques for implication of effective marketing techniques. In other words, to achieve ongoing customer recruitment one would expect that our firm would invest appropriate resources in managing supply and demand and controlling the quality of the service. For example, the expectation would be that it is concentrated on the market, developing innovative, competitive services and pricing offers that have mass appeal and improving the quality of the core offer while keeping costs in relation to the service. The use of core transaction marketing activities is very important aspect for a hospital. The more the transaction marketing activities the more hospital is flexible to cope with the customer needs. Marketing strategy properly developed is closely related to business strategy. In fact in a market led business the two should be indistinguishable. Marketing strategies and marketing perspective should therefore give direction to the strategies of a service business, from service design through to after care policy. A service strategy within an organisation requires the analysis of the various environmental forces, identification of organisations goals and the factors critical to the attainment of these goals and precise definition of the actions that the organisation can conduct.

¤ Use of Core Relationship Marketing Activities

In a dynamic and competitive environment achieving customer retention objectives is hugely important. With heightened competitive activity the benefits that can be derived from the long term retention of profitable customers, such as increased profitability, reduced costs per customer and word of mouth referrals, can never be adequately stated. Hence, we would recommend relationship marketing as the appropriate practice. Relationship marketing practices are (physical evidence activities, process activities are core relationship marketing activities, people activities) depicted on the lower right hand side of the figure. The relationship marketing activity increases the customer opportunity. Customers achieve the desired service from the service firm. Festival discount, instant cash prizes, raffle draw, are some of the core relationship marketing activities. So a service form must increase the opportunity to satisfy the customers.

The RM-specific guidelines with regards to:

Company:

• Has stated desire for RM through investment commitment
• Must believe in one-to-one future (Co-ordination between functions, and consistency of approach, are key here)
• Must believe better relationships lead to competitive advantage
• Must be customer-driven
• Advertisement in media is needed for RM marketing strategy.
• To identity new RM based marketing strategies

Staff:

• Emphasis is on excellent communication with customers to ‘connect’ and spot opportunities
• Empowered, self-managed staff that can make quick decisions for customers
• Skilled employee is needed in order to identify the actual needs of a patient.
• Employee should give the right direction in order to achieve the goals of the hospital.
• The staff must give a strong confidence in an emergency of a patient.
• Should follow the normative model “What should or must do”.
• Must cooperate with the needs of a patient.

Technology:

• Information is powerful and vital to strategy. Customer information must be used in strategic management.
• Highly integrated systems and processes (data cleaning and data modelling initiatives should be in place).

• The access to which a customer exchange information.
• Databases used for contact management purposes.
• Customer contacts used as marketing research opportunity
• Information of the patient must be kept in the database in the hospital
• New sophist iced machine is needed to achieve customer satisfaction.
• Planning, budgeting, financing should be used in high end software.
• The information must be up-to-date.

Customers:

• Emphasis should not be on the value to be achieved from customers today through the service rather should be on current and potential value of customers with lifetime value focus.

• Relationship achieved through integrating technology and the human face
• Use contact to regularly update systems
• Customer recognizes the hospital as a brand.

¤ Use of Support Activities:

While the other marketing aspects (Mass Communication Activities, Sales Promotion Activities, Public Relations Activities, Personal Selling Activities) depicted in the middle of figure above certainly support both transaction and relationship marketing, this role is predicated on the core activities displayed on either sides of the model. Support activity helps to achieve the RM activities. Without the support activities it is difficult to continue the RM activities. The support activity may also be labeled as the ‘Integrated marketing communication’ activities. To sustain in the competitive business scenario advertising with brand awareness is essential to retain the customers. Mass Communication Activities, Sales Promotion Activities, Public Relations Activities, Personal Selling Activities are some of the key factors to maintain public relations with increasing consciousness to the customers.

Figure: The IMC mix

MPR activities may be managed internally or a PR agency may be used to complement internal staff in just the same way that advertising or sales promotions agencies may be employed to assist with other promotions.

ADVERTISING

Key Account Management

There is a useful KAM tool for examining sources of competitive advantage and characterizing managerial behavior.

● Pre-KAM – management needs to determine which customers or potential customers are candidates for key account status. It is pointless trying to develop a customer into a key account if that customer is either not interested in building a relationship or is unlikely to be profitable.

● Early-KAM – involves identifying potential opportunities to develop the business. The main contact will be between the key account manager in the selling company and the main contact in the buying company.

● Mid-KAM – trust begins to develop between both buyer and seller. The salesperson is likely to take a less important role as other contacts between different functions begin to develop between both organizations. Some relationships may only develop as far as that of preferred supplier.

FIGURE: KAM RELATIONAL DEVELOPMENT MODEL

● Partnership-KAM – this is the mature stage of KAM. Close communications develops between corresponding parts of each organization.

● Synergistic-KAM – KAM goes beyond partnership as both organizations operate almost as one.

● Uncoupling-KAM – few relationships last forever and there may be a natural end to a partnership or a split-up.

¤ Use of both Transaction and Relationship Marketing Activities

It is clear for our discussion above that in seeking to simultaneously recruit and retain customers’, transaction and relationship marketing activities are both equally important. In order to ensure effective customer recruitment, our firm must implement effective transaction marketing activity, that is, attention and focus should be directed towards the core marketing dimensions (product activities, distribution activities, pricing activities) depicted on the left hand side of the model. On the other hand, when retaining profitable customers over the longer term our hospital must focus on the core relationship marketing aspects (physical evidence activities, process activities and people activities) depicted on the lower right hand side of the figure. Additionally, we must implement the support activities to implement both transactional and relationship marketing initiatives.

In Context of United Hospital

Currently United Hospitals have extensive print ads which are given in different newspapers and magazines. The ads are well designed with good persuasion skills.  However they lack the television commercials (TVCs) of their hospitals. They should launch some good TVCs, in fact their close rival like Apollo Limited and Lab Aid has already launched some few TV ads.

The hospital has a pretty decent website. The site is well designed with no broken link. The colour combination is soothing. The navigation is simple and all the information in the website is relevant.

A PR agency may be used to complement internal staff in just the same way that advertising or sales promotions agencies may be employed to assist with other promotions.

Media Releases:

United hospital should promote their ad on both print media and broadcast media. The ad should be informative. The price, the place, the location and the services should be clearly explained in those ads. They can provide some video clips of real life demonstration, for example, the way the patients are server inside the hospital.

The hospital should promise about the appropriateness of the treatment and give guarantee they will try their best to do whatever is necessary to cure and safe the patients live.

The contact numbers are very important. United hospital should make sure in terms of emergency people can get their number. All of their ads should emphasize on the phone number and their address.

The Promotion Campaign:

The promotion should have a unified message launched through different media, for example Print Ads in newspaper, billboards, television commercials etc. There should be consistency on what they are trying to say.  It should be promoted in such a way so that it stays in people’s minds for a long time.

The promotion campaign should connect people at an emotional level. United Hospital should make some emotional TVC’s. They should distribute the leaflets outside the different schools, the shopping malls and mosques of different areas. There should be some good billboards of United Hospital where the massages could be read quickly. They should also consider lunching there in the radio broadcast.

The massages in the advertisements should be easy to read, written in an audience language that will communicate the readers mind. The listeners should be able to visualise the ads understanding clearly the central idea.

It is really important that United Hospital promote themselves through social media – through social interaction, created using highly accessible and scalable publishing techniques for example blogs, micro blogs, social networks , video and sharing, etc. They have to:

• Promote the hospital’s services lines, new technology, association with new doctors, awards, events, etc.

• Monitor and protect the brand reputation. What are patients and consumers saying? By monitoring certain Social Media channels, they can find out. And then decide how or even if to respond.

• Follow what consumers are saying about the competition.

• Know the competitor’s service lines, events, new technology, etc .

• Communicate with the media. Journalists and reporters use Social Media as a source for breaking stories earning your hospital opportunities for articles and publicity.

• Establish focus groups to gain more knowledge and insight. What are the community’s needs or expectations? How effective will a particular message be if used in traditional media? They have to find out quickly and honestly.

• Form and keep communication open with expectant moms, diabetics, or heart patients. Send specific groups reminders about meetings, medication, healthy habits, etc.

• Raise funds. There are tools on several Social Media sites that can be used to raise money for hospital’s cause.

• Plan an event for a social cause or an educational program, for example social awareness program for healthy lifestyle. This will help them to manage the communication between the hospital and the audience- Public Relation.

Summary

• United Hospital should use both the conventional and non conventional methods in their IMC strategy. If customers get the same message and visual clues in both places, they are much more likely to comprehend the marketing message. By doing this, United Hospital Ltd will be able to have more convincing power.
• Elements of the Integrated Marketing Communications Plan should include:
• Web site: What does your web site say about the company? Is it informative, easy to use, ecommerce ready? The web site should be available at all times, and ready to speak represent the hospital.
• Advertising: print, online, radio, or television.  The combination of right mediums should be chosen that gets the message to the target audience where they are likely to be ready to receive it.  A consistent, repetitive approach should be used to build awareness and recall.
• Online Marketing: advertising, opt-in email marketing and links from other sites. They should try to communicate with the customers online and use the appropriate methods to reach and retain them.
• Direct mail, personal selling, networking and many more methods allow getting the message to the customers and convincing them to take the health care service.

Chapter 4: Implementation & Evaluation: 4.1 Corporate strategies:

A firm must make decisions at the top level to implement the marketing actions explained earlier. The premise hence is that the marketing initiatives must take the centre stage. The corporate strategies may be dimensionalized as the 4C’s (confrontation, cooperation, capture and care) of strategies (Moniruzzaman, 2007). This means a firm may implement the services marketing actions by means of the 4C’s.

Exhibit 4:  4C’s of Strategic Management (Moniruzzaman, 2007)

4.1.1 CONFRONTATION OR COMPETITION

 Confrontation strategies refer to competitive strategies. Competitive strategies are classified in two ways depending on whether a firm wants to build or hold. Competitive strategies include:

• · TO BUILD (or grow):

• FRONTAL ATTACK: taking the defender head-on in its main segment(s) with regards to pricing, distribution, promotion and branding strategies. This is suitable when the attacker has: (i) competitive advantage and knows it can outperform the defender; and/or (ii) no other option but to face the defender face to face.
  • United Hospital can go for frontal attack by increase the promotional activities to attract more customers. They have to take initiatives to recognize their brand to the people. In the promotional activity they should use emotional appeal or slice of life, so that people will relate their want with the promotion of United Hospital and they will buy their medical service.

• FLANKING ATTACK: this involves attacking unguarded or weakly guarded market segment(s). The reason flanking may succeed is that the defender usually ignores such attack since the segment/market is not its main focus. However, it is possible for the attacker to achieve market-wide penetration based on its success in the defender’s flank (s).
• ENCIRCLEMENT: attacking defender in all segments.

• BYPASS ATTACK: this circumvents the defender’s position. A bypass attack may change the rules of the game, usually by technological leapfrogging.

• GUERRILLA ATTACK: this hurts the defender by pin-pricks rather than blows. Underdogs may use unpredictable price discounts, sales promotions or heavy advertising on television channels are useful. Defender, however, may seriously retaliate with a full frontal attack if sufficiently provoked.

• POSITION DEFENCE: This involves building a fortification around the existing service. In other words, this is applied to protect the main service. If the service is good and cannot be easily copied it may work rather well. But it may dangerous when competitors attack with a superior service. 
  • United Hospital should first retain the position in the market. They should follow this defense strategy to defense their existed service.

• FLANKING DEFENCE: This is characterized by the defense of a hitherto unprotected market segment. If the segment is left unprotected, it will provide a beachhead for new entrants to gain experience in the market and later attack the main market.

• PRE-EMPTIVE DEFENCE: The best of defense is to attack first. This involves continuous innovation and new service. It is a good idea for a leader to dissuade a would-be attacker by, for instance, cutting its price, thereby reducing its profitability. Would-be attackers typically fear that the market may have become unattractive or else why would the leader encounter a reduction in margins!!!

• COUNTEROFFENSIVE DEFENCE: When attacked a defender may choose three strategies: (i) head-on counterattack; (ii) hitting the attacker’s cash cows; or (iii) encircle the attacker. Head-on may involve price reduction or aggressive promotions or even innovation. Hitting the attacker’s cash cows is striking the attacker’s resource supply-line.

• MOBILE DEFENCE: The major strategic option is diversification.

4.1.2 CAPTURE: ACQUISITION (TAKE OVER)

Horizontal Integration

The acquisition of additional business activities at the same level of the value chain is referred to as horizontal integration. This form of expansion contrasts with vertical integration by which the firm expands into upstream or downstream activities. Horizontal growth can be achieved by internal expansion or by external expansion through mergers and acquisitions of firms offering similar products and services. A firm may diversify by growing horizontally into unrelated businesses.

4.1.3 COOPERATION: STRATEGIC ALLIANCES, MERGERS

Alliances and Joint Ventures

Alliances and joint ventures take many forms, including licensing agreements, franchise agreements, relational contracting, relational management, consortia, virtual corporations, virtual functions and joint ventures. It is not the details of these which are important as much as the underlying rationale for strategic alliances in the first place. The success rate of mergers and take-overs has been low; it is therefore important to determine whether or not this form of cooperative action leads to better results. Although in Porter’s study the rate of divestment of joint ventures was lower (50 per cent compared with 75 per cent), other research has found no significant long term effects of joint venture activity on profitability in any industrial sector. Given this, the real issue is why companies should choose an arm’s-length contract rather than entering into a full merger.

• United Hospital can go for a strategic alliance with the medical colleges in Bangladesh to provide them with best doctors graduated from these colleges.
• They can make alliances with the foreign medical societies. It will ensure that foreign qualified doctors will come to United Hospital and provide them services.
• Telecommunication and use of internet has become very easy to access. Bangladesh governments aim is to make digital Bangladesh. United Hospital can take this opportunity making alliances with foreign reputed hospitals. UHL can arrange a teleconference session for the patients with foreign specialist. It will help both parties. United Hospital will gain profit by arranging the service and foreign hospital will gain profit by providing the service to the patient. The patients’ will be benefited as it will reduce the cost of the service.

¶MERGER:

A corporate merger is the combination of the assets and liabilities of two firms to form a single business entity. In a merger of firms that are approximate equals, there often is an exchange of stock in which one firm issues new shares to the shareholders of the other firm at a certain ratio. For the sake of this discussion, the firm whose shares continue to exist (possibly under a different company name) will be referred to as the acquiring firm and the firm whose shares are being replaced by the acquiring firm will be referred to as the target firm.

Excluding any synergies resulting from the merger, the total post-merger value of the two firms is equal to the pre-merger value. However, the post-merger value of each individual firm likely will be different from the pre-merger value because the exchange ratio of the shares probably will not exactly reflect the firms’ values with respect to one another. The exchange ratio is skewed because the target firm’s shareholders are paid a premium for their shares.

Synergy takes the form of revenue enhancement and cost savings. When two companies in the same industry merge, combined revenue tends to decline to the extent that the businesses overlap in the same market and some customers become alienated. For the merger to benefit shareholders there should be cost saving opportunities to offset the revenue decline; the synergies resulting from the merger must be more than the initial lost value.

To calculate the minimum value of synergies required so that the acquiring firm’s shareholders do not lose value, an equation can be written to set the post-merger share price equal to the pre-merger share price of the acquiring firm as follows:

The above equation then can be solved for the value of the minimum required synergies.

The success of a merger is measured by whether the value of the acquiring firm is enhanced by it. The practical aspects of mergers often prevent the forecasted benefits from being fully realized and the expected synergy may fall short of expectations.

4.2 IMPLEMENTATION

The implementation stage is visualised as starting after the choice of strategy has been made. Once implementation gets under way it is to be expected that there will be a constant process of feedback with earlier stages. As resources are mobilised it may become apparent that the original objectives are unattainable, that predicted costs were too low, that likely competitive reaction was overestimated and that the full range of strategy choice was not realised. This may make it difficult to isolate implementation as an independent activity in practice. However, by treating implementation as an independent part of the strategy process, the manager is forced to recognise that no matter what sophisticated analysis has been undertaken to arrive at a strategic choice, at the time the choice is made it is possible that nothing has been produced and nothing has been sold. In other words, choosing strategy is not an end in itself; unless there is a mechanism for making it happen it is a somewhat pointless activity.

The process of strategy implementation involves

1. Resource planning
2. Budgeting
3. Selecting and recruiting suitable individuals
4. Train individuals who would implement the actions
5. Designing an organisation structure compatible with the actions: These are the people who have the experience and skills required to handle the actions
6. Distributing tasks among these individuals using the organisation structure and allocating resources needed to accomplish each task. Hence, resources include money, time, technology, and so on.
7. Setting targets

 A.  Resource Planning

If the company is ever going to achieve a competitive advantage, it must set up procedures to ensure that resources are used efficiently. Inter-functional coordination is critical to fulfilling the needs of customers. Resource planning has implications for all aspects of company’s performance.

B. Budgeting

The problem of allocating budgets is encountered at many levels, but for strategy purposes these can be reduced to two: the corporate and SBU or functional levels. At the corporate level the overall budget is rationed among competing alternatives, typically on the basis of proposals submitted by SBUs. At the SBU or functional level it is necessary to allocate funds to individual managers so that they can carry out the tasks which are required to achieve the objectives of each investment; the investment appraisal which revealed that the net cash flows generate a positive NPV does not usually take into account uncertainty as to how costs will actually be incurred and resources deployed.

There are many reasons why a company may be unable to raise money on the market to finance investments. The most obvious one is when the market does not agree with the company’s estimate of future returns; the track record of the company’s managers may be such that the market views their plans with considerable reserve. Another reason is that the company may be unwilling to reveal its intentions to competitors. The desirability of an investment may depend on achieving a competitive advantage which would be impossible if competitors knew what the company’s strategy was likely to be. In fact, strategic options are often difficult to define with tile precision which will attract investors. It is one thing to use investment appraisal to attempt to estimate the relative value implications of alternative strategies, but it is quite another to translate this into a convincing investment plan.

It therefore seems likely that the company will be faced with a budget constraint when allocating available funds among competing investments. The theory of finance can provide a solution to the capital rationing problem of determining which combination of investments will add most to shareholder wealth within the context of the chosen strategy. However, the application of sophisticated capital rationing techniques does not necessarily resolve the budget allocation problem. This is because the formal capital rationing solution is in terms of a combination of investments, and may exclude some investments with higher NPVs than those included. It may be difficult to explain to an SBU manager that his proposed investment, with a relatively high NPV, has been excluded because of the application of an obscure financial technique. It is obviously important to use appropriate financial techniques to identify the most profitable budget allocation; whether it is feasible is another matter.

One way to avoid the difficulties associated with capital rationing is to set across-the-board budget limits; this has the advantage that all SBUs are treated in the same way, and in turn the SBUs can set across-the-board limits, since this is consistent with corporate policy. However, such an approach is inconsistent with principles of efficient resource allocation. The whole emphasis of the strategic planning process has been on the identification of activities with different potential pay-offs and directing resources accordingly. For example, if the objective were to increase the market shares of products currently being produced, it would make little sense to increase the research budget at the same time simply because the marketing budget was to be increased. On the other hand, if there is no sensible budgetary control, when companies are faced with adverse market conditions and decide to follow a retrenchment strategy the first thing that is usually done is to cut back on those budgets which can be manipulated without affecting current performance. Training, research and maintenance budgets are often pruned to achieve an immediate increase in ROI without proper consideration of the overall resource allocation implications. This is often justified by senior management on the grounds that survival is the primary concern and refinements can come later. This reaction is probably inevitable when senior management concentrates attention on short term cash flows rather than on the concept of shareholder wealth, which puts short term cash flows into context.

 At the functional level the SBU manager is confronted with many imponderables. If a new market is being entered he has to decide how much to allocate to marketing and over what period. The marketing manager has to decide how much to allocate to market research, advertising, promotions and so on. By the time the original funds have been parcelled up and allocated to the various functions, it may be difficult to identify specific expenditure with the original project. The original investment appraisal assumed that the cash would be used efficiently at the functional level. The management problem at this level is to ensure that this happens, but there may be relatively few guidelines to assist managers who are in the front line. An ostensibly attractive strategy may flounder because budgets are disseminated throughout the organisation in a haphazard fashion.

 Company conducts recruitment and selection of people who have the aptitude and motivation for success.

1. Set selection criteria that must be met by the candidates (e.g. education, experience, age, ability to work own or in a team, communication skills, physical requirements such as speech, appearance)
2. Invite applications
3. Shortlist candidates based on the criteria
4. Interview candidates
5. Conduct test centres to determine applicant’s individual abilities as well as ability to work in a team
6. Hire the individuals who score best overall in accordance with the criteria

1. Analyse employee’s performance
2. Identify his/her strengths and weaknesses
3. Train him/her to overcome weaknesses and maximize strengths

Training programmes such as on-the-job training as well as formal training courses (both in-house and at other institutions) must be arranged to develop personnel.

Vertical coordination

Coordination of activities vertically in a top down or bottom up fashion or both.

THE MEANS OF VERTICAL COORDINATION:

A. The Chain of command: The unbroken line of authority that ultimately links each individual with the top organizational position thorough a managerial position at each successive layer in between.

The Concepts in chain of command

1. Unity of command: Every employee has only one boss (example, marketing manager reports to marketing director)

2. Scalar principle: Every employees report to their bosses in a linear fashion (example, marketing manager reports to marketing director, marketing director reports to the managing director)

B. Span of management or span of control

Span of control is the number of subordinates who report directly to a specific manager.

 Spans of management or control determine the number of hierarchical levels in an organization.

The effects of very tall organization structure: Very tall organizations raise administrative overhead, slow communication and decision making, make it more difficult to pinpoint responsibility for various tasks, and encourage the formation of dull, routine jobs.

Ways to resolve the problem with tall structure:

 In two ways:

a. Downsizing is the process of significantly reducing the layers of middle management, expanding the spans of control, and shrinking the size of the work force.

 b. Restructuring is the process of making a major change in organization structure that often involves reducing management levels and also possibly changing some major components of the organization through divestiture and/or acquisition.

 C. Delegation:

Delegation is assignment of part of manager’s work to others along with responsibility and authority.

What is delegated by managers?

1. Responsibility is the obligation or expectation to perform and carry out duties and achieve goals related to a position.

2. Authority is the right inherent in a managerial position to tell people what to do and to expect them to do it, right to make decisions and carry out actions to achieve organizational goals.

While part of a manager’s work may be delegated, the manager remains accountable for results.

The types of authority

a. Line authority and b. Staff authority.

The differences between the Line authority and staff authority:

1. A line position is a position that has authority and responsibility for achieving the major goals of the organization.

2. A staff position is a position whose primary purpose is providing specialized expertise and assistance to line positions.

The result of delegation:

 Managers delegated with authority and responsibility become accountable to the senior managers.

Accountability is the requirement of being able to answer for significant deviations from duties or expected results.

How much authority should a firm delegate?

This is determined by extent of centralization or decentralization

a. Centralization is the extent to which power and authority are retained at the top organizational levels.

 An organization is centralized if decisions made at lower levels are governed by a restrictive set of policies, procedures, and rules, and if situations not explicitly covered are referred to higher levels for resolution.

b. Decentralization is the extent to which power and authority are delegated to lower levels.

An organization is decentralized to the extent that decisions made at lower levels are made within a general set of policies, procedures, and rules, with decisions not covered left to the discretion of lower-level managers.

Centralization offers advantages.

 a. It is easier to coordinate the activities of various units and individuals.

b. Top managers have more experience and may therefore make better decisions.

c. Top managers have a broader perspective on decision situations.

d. Duplication of effort by various organizational units can be avoided.

e. Strong leadership is promoted.

Decentralization offers advantages.

a. Top managers can concentrate upon major issues.

b. The jobs of lower-level employees are enriched by the challenge of making decisions.

c. Decisions can be made faster.

d. Individuals at lower levels may be closer to the problem and may be in a better position to make good decisions.

e. Relatively independent units emerge as divisions, with more easily measured outputs. 

Organizations should move toward a decentralized structure when:

a. The organization is so large that top managers do not have the time or the knowledge to make all the major decisions.

b. Operations are geographically dispersed.

c. Top managers cannot keep up with complex technology.

d. The environment is increasingly uncertain.

Horizontal coordination

Coordinating activities across the departments of an organization.

The means of horizontal coordination:

1. LATERAL RELATIONS: Relationships between people across departments (example, between people in marketing, production, human resource departments)
2. INFORMATION SHARING: Sharing of information  between people in different department regarding tasks, progress made in terms of tasks, departmental policy changes
3. SHARING OF RESOURCES: People in different departments share resources, specially, slack (extra) resources (example, management teachers teaching some IT courses and IT teachers teaching management courses)

Organization chart or organogram

Organization chart or organogram is a line diagram that depicts the broad outlines of an organization’s structure. While varying in detail from one organization to another, typically organization charts show the major positions or departments in the organization, the way positions are grouped together, reporting relationships for lower to higher levels, official channels for communications, and possibly the titles associated with major positions in the organization.

THE MAIN ORGANISATIONAL STRUCTURES

Four main structures:

1. Functional; 2. Divisional; 3. Hybrid; and 4. Matrix structures.

Functional structure is a type of departmentalization in which positions are grouped according to their main functional (or specialized) area.

 The functional form of organization has several major advantages.

 a. In-depth development of expertise is encouraged.

b. Employees have clear career paths within their function.

c. Resources are used more efficiently.

d. Economies of scale may be possible because of specialized people and equipment.

e. Intradepartmental coordination is facilitated.

f. Specialized technical competencies may be developed and may constitute

a competitive advantage.

 The functional form of origination has several disadvantages.

a. Response time on multifunctional problems may be slow due to coordination problems.

b. Major issues and conflicts between departments may have to be resolved by top management, with resultant delays.

c. Bottlenecks due to sequential tasks.

d. Over specialization may lead to a restricted view of the department’s and the organization’s needs.

e. Performance may be difficult to measure because several functions are responsible for organizational results.

f. Managers may be trained too narrowly in a single department.

The functional form of departmentalization is more appropriate under certain circumstances.

a. The organization is small or medium-sized.

b. There is a limited number of related products or services, or a relatively homogeneous set of customers or clients.

c. The organization is large and diverse, but the environment is stable.

B.  A Divisional structure

Divisional structure is a type of departmentalization in which positions are grouped according to similarity of products/services, or markets.

Types of divisional structure: 

a. Product/service divisions are divisions created to concentrate on a single product or service or at least a relatively homogeneous set of products or services.

b. Geographic divisions are divisions designed to serve different geographic areas.

DIVISIONAL STRUCTURE

c. Customer divisions are divisions set up to service particular types of clients or customers. 

Divisional structure has several major advantages.

a. Divisions can react quickly to changes in the environment.

b. Coordination across functions is simplified.

c. Each division can focus upon serving its customers.

d. The division’s goals can be emphasized.

e. Performance is more easily measured.

f. Managers can be trained in general management skills.

Divisional structure has several disadvantages.

a. Duplication of resources in each division often occurs.

b. In-depth expertise may be sacrificed.

c. Divisions may compete for limited resources.

d. Expertise across divisions may not be shared.

e. Innovations may be restricted to single divisions.

f. Divisional goals may take priority over overall organizational goals. 

The divisional structure is likely to be used in large organizations where substantial differences exist among products or services, geographic areas, or customers served.

C. Hybrid structure is a form of departmentalization that adopts parts of both functional and divisional structures at the same level of management. 

Hybrid structures are adopted by large organizations to gain the advantages of functional and divisional structures.

a. Functional departments are created to take advantage of resource utilization efficiencies, economies of scale, or in-depth expertise.

b. Divisional departments are usually created to benefit from a stronger focus on products, services, or markets.

The hybrid structure has several advantages. 

a. Corporate and divisional goals can be aligned.

b. Specialized expertise and economies of scale can be achieved in major functional areas.

c. Adaptability and flexibility may be achieved in handling diverse product or service lines, geographic areas, or customers.

The hybrid structure has several disadvantages. 

a. Conflict may arise between departments and divisions.

b. Hybrid organizations tend to develop excessively large staffs in the corporate-level functional departments.

c. There may be a slow response to exceptional situations requiring coordination between a division and a corporate functional department.

The hybrid structure is best used under particular conditions.

a. The organization faces environmental uncertainty best met by a divisional structure.

b. The organization requires functional expertise and/or efficiency.

c. The organization has sufficient resources to justify the structure.

MATRIX STRUCTURE

D. A matrix structure

A matrix structure is a type of departmentalization that superimposes a horizontal set of divisional reporting relationships onto a hierarchical functional structure.

Characteristics of a matrix structure:

1. An organization with a matrix structure has a functional and a divisional structure at the same time.

2. Employees who work in a matrix organization report to two “bosses,” thus, the unity-of-command principle is violated.

3. Organizations that adopt a matrix structure usually go through several identifiable structural stages:

a. Stage 1 is a traditional structure, usually a functional structure, which follows the unity-of-command principle.

b. Stage 2 is a temporary overlay in which managerial integrator positions are created to handle issues of finite duration that involves coordinating across functional departments.

c. Stage 3 is a permanent overlay in which the managerial integrator positions become permanent.

d. Stage 4 is a mature matrix, in which matrix bosses have equal power.

4. As an organization passes through the matrix stages, horizontal integration increases at the cost of greater administrative complexity.

The matrix form of organization has several advantages.

a. Decision making can be decentralized.

b. Horizontal coordination is strengthened.

c. Environmental monitoring is improved.

d. Responses to environmental changes are quickly made.

e. Functional specialists can be added to or resigned to projects as needed.

f. Support systems can be allocated to projects as needed.

Matrix designs have several disadvantages.

a. Administrative costs are increased.

b. Lines of authority and responsibility may not be clear to individual employees due dual authority.

c. Possibilities of conflict are increased.

d. Individuals can become preoccupied with internal relations at the expense of clients and project goals.

e. All decisions may become group decisions, leading to gross inefficiency.

f. Reactions to change may be slowed if interpersonal skills are lacking or top management fights for control.

 Matrix designs are usually appropriate when the following three conditions are met:

a. The considerable pressure from the environment that necessitates a simultaneous and strong focus on both functional and divisional dimensions.

b. The demands placed on the organization are changing and unpredictable, making it important to have a large capacity for processing information and coordinating activities quickly.

c. There is pressure for shared resources.

Research indicates some of the factors that may be necessary to the success of a matrix system

a. The organizational culture may need to be changed to support collaboration.

b. Managers may need special training, especially in interpersonal relations.

E. Of particular interest are two new types of organizational structure that have recently emerged: the process structure and the networked structure.

1. A process structure is a type of departmentalization which groups positions into process team which are given beginning-to-end responsibility for that process or that specified work flow. The process structure is sometimes called the horizontal organization.

2. The networked structure is a form of organizing in which many functions are contracted out to other independent firms and coordinated through the use of information technology networks. Sometimes the networked structure is called the virtual corporation because it performs as virtually one corporation.

4.3 STRATEGIC IMPLEMENTATION: SOME BROAD STRATEGIES

USING McKinsey’s 7’s as a guide implementation:

McKinsey and Company have developed a model known as, “the seven elements of strategic fit,” or the “7-S’s.”

7-S’s include:

1. strategy (the coherent set of actions selected as a course of action);

2. structure (the division of tasks: the organization structure/chart);

3. systems (the processes and flows that show how an organization gets things done: chain of command, delegation, communication etc.);

4. style (how management behaves);

5. staff (the people in the organization);

6. shared-values (values shared by all in the organization); and

7. skills (capabilities possessed by the organization).

The underlying concept of the model is that all seven of these variables must “fit” with one another in order for strategy to be successfully implemented.

However, shared values (based on common purpose) are central to the framework because they pull the hearts and the minds together.

4.4 THE FIVE APPROACHES TO IMPLEMENTATION

1. The Commander Approach

The strategic leader concentrates on formulating the strategy, applying rigorous analysis. The leader either develops the strategy himself or supervises a team of planners charged with determining the optimal course of action for the organization. He typically employs such tools as experience curves, growth/share matrices, and industry and competitive analysis.

This approach addresses the traditional strategic management question of “How can I, as the strategist, develop a strategy for my business which will guide day-to-day decisions in support of my longer-term objectives?” Once the “best” strategy is determined, the leader passes it along to subordinates who are instructed to execute the strategy.

The leader does not take an active role in implementing the strategy. The strategic leader is primarily a thinker/planner rather than a doer.

Three conditions must exist for the approach to succeed:

•The leader must wield enough power to command implementation; or, the strategy must pose little threat to the current management, otherwise implementation will be resisted.

•Accurate and timely information must be available and the environment must be reasonably stable to allow it to be assimilated.

•The strategist (if he is not the leader) should be insulated from personal biases and political influences that might affect the content of the plan.

A drawback of this approach is that it can reduce employee motivation. If the leader creates the belief that the only acceptable strategies are those developed at the top, he may find himself in an extremely unmotivated, un-innovative group of employees.

However, several factors account for the Commander popularity. First, it offers a valuable perspective to the chief executive. Second, by dividing the strategic management task into two stages -“thinking” and “doing” -the leader reduces the number of factors that have to be considered simultaneously. Third, young managers, in particular, seem to prefer this approach because it allows them to focus on the quantitative, objective elements of a situation, rather than with more subjective and behavioural considerations.

Finally, such an approach may make some managers feel as an all-powerful hero, shaping the destiny of thousands with his decisions.

 2. The Organizational Change Approach

This approach starts where the Commander Approach ends or is not appropriate. The organizational Change Approach addresses the question “I have a strategy – now how do I get my organization to implement it?” The strategic leader again decides major changes of strategy and considers the appropriate changes in structure, personnel, and information and reward systems if the strategy is to be implemented effectively.

The most obvious tool for strategy implementation is to reorganize or to shift personnel in order to lead the firm in the desired direction. The role of the strategic leader is that of an architect, designing administrative systems for effective strategy implementation.

The Change Approach is often more effective than the Commander Approach and can be used to implement more difficult strategies because of used the several behavioural science techniques. This technique for introducing change in an organization includes such fundamentals as: using demonstrations rather than words to communicate the desired new activities; focusing early efforts on the needs that are already recognized as important by most of the organization; and having solutions presented by persons who have high credibility in the organization.

However, the Change Approach doesn’t help managers stay abreast of rapid changes in the environment. It can backfire in uncertain or rapidly changing conditions. Finally, this approach calls for imposing the strategy in a “top-down” fashion and is subject to the same motivational problems as the Commander Approach.

3. The Collaborative Approach

This approach extends strategic decision-making to the organization’s top management via the question “How can I get my top management team to help develop; and commit to a good set of goals and strategies?”

The lower level manager/leader and his senior manager (divisional heads, business unit general managers or senior functional managers) meet for lengthy discussion with a view to formulating frameworks for strategy implementation.

In this approach, the leader employs group dynamics and “brainstorming” techniques to get managers with differing points of view to contribute to the strategic management and implementation process.

 The Collaborative Approach overcomes two key limitations inherent in the previous two. (i) It can increase the quality and timeliness of the information incorporated in the strategy by capturing information contributed by managers closer to operations. (ii) It improves the chance of efficient implementation since the greater degree of staff participation enhances their commitment to the strategy.

Although the Collaborative Approach may gain more commitment than the previous approaches, it may also result in a poorer outcome.

The negotiated aspect of the process brings with it several risks that the strategy will be more conservative and less visionary than one developed by a single person or team. And the negotiation process can take so much time that an organization may miss out on opportunities and fail to react adequately to changing environments.

 F. Motivation and compensation

Design of an attractive compensation and reward package is needed to attract, retain and obtain substantial effort from good personnel. To accomplish this, the company needs to decide the following:

1. Type of compensation (e.g. straight salary, or commission only or salary and commission)
2. Level of compensation (e.g. amount of salary)
3. Type and amount of non-financial rewards including the opportunity for advancement (e.g. promotion)

Ideally, incentives should be related to the value creating activities of the company; in other words, the incentive system should reward individuals for adding value. But, given the difficulty of determining value for the company as a whole, it is clearly impossible to parcel out the components of added value to managers and employees. On the other hand, it should be possible to recognise when the incentive system is at odds with the value creation objective. For example, a production manager who is rewarded for minimising inventories can cause havoc with a marketing strategy aimed at achieving an increased market share.

It is important for managers to recognise that the incentive system may be at fault when the performance of individuals does not match expectations. In fact, one of the barriers to change is that incentive systems are not reviewed to ensure that they are consistent with revised company and individual objectives; what is perceived as being unwillingness to change may be partly due to the fact that individuals can see that a proposed change is not to their advantage given the existing system of incentives. It is a basic fact of life that managers and employees will be unwilling to change their behaviour if the benefits of doing so are perceived as being lower than the costs to themselves. A change in the incentive system can go a long way towards easing the implementation of change.

 G. Setting Targets

The allocation of resources to selling is a basic determinant of strategic success, given that the mechanism by which target market share is achieved is by setting targets to SBUs and to individuals. Companies use sales targets to give the employees an idea of what is expected of them, and to serve as part of an incentive system. But what criteria can be used to determine what the target market share should be, or how many units should be sold by a particular sales group in a particular segment of the market? Attention is usually not directed towards how much should be sold, but on how much can be sold; however, concentrating on the maximisation of sales with existing sales resources does not address the underlying resource problem. The resource allocation question can be trained in the following fashion using the concept of marginal analysis:

 Is Marginal Revenue > Marginal Cost?

If the additional revenue associated with the last unit sold is greater than the additional cost incurred in making the sale, then it is worthwhile aiming for that level of sales. While it is important to bear this principle in mind, it is difficult to apply in practice because the information available is in terms of expectations of revenues and costs:

 Is Additional Expected Net Revenue > Additional Expected Cost?

Furthermore, the evaluation cannot be made simply in terms of the price versus the unit cost because an increased sales effort which results in a higher market share can contribute to long term competitive advantage. For example, a higher market share could lead to the ability to set higher prices in the future, and to a lower unit cost because of economies of scale and experience effects. While the expected revenues and costs are difficult to estimate with precision, it is useful to attempt an approximation which will make explicit how the sales target fits into the general goal of value creation. In the absence of information on expected revenues and costs many managers set the objective of maximising sales as a second best; this may be a reasonable basis for ongoing decisions on sales, but it has the potential to promote a serious misallocation of resources.

The trade-offs can be put in context in a similar fashion to the determination of target market share by applying the basic income and cost model:

Net Income = Total Market x Market Share X (Price – Unit Cost)

Sensitivity analysis can be used to project different scenarios over the product life cycle; the discounting approach can be used to evaluate different scenarios in NPV terms. This can help indicate the appropriate level of sales, and provide managers with a degree of confidence that the revenue from selling the last unit is at least as high as the cost of producing and selling it.

A further dimension of marginal cost relates to the opportunity cost, rather than the financial cost, of additional sales when the product is sold in a number of segments. If the resources available to allocate to selling the product are limited, they should be allocated among different segments of the market such that the marginal benefit equals the marginal cost in the different segments. If this condition did not hold, net revenue could be increased by allocating resources from those activities where marginal cost was greater than marginal benefit to those where marginal cost is less than marginal benefit.

4.5 STRATEGIC EVALUATION

When the marketing plan is implemented it is necessary to measure and evaluate actual performance to find out if the expectations are being fulfilled. When the component parts of the plan have been made explicit, the plan provides a benchmark against which actual outcomes can be compared, so that when variations between expected and actual outcomes occur their causes can be investigated. For example, it may be found that the net contribution from a particular product is lower than anticipated in the plan; this could occur for a variety of reasons, for example because the selling price turned out to be lower than predicted, or because productivity was lower, or because market share turned out to be harder to win. The reason for the shortfall will suggest whether action should be taken to achieve the original objectives, or whether the plan itself needs revision in the light of events; it is essential to identify whether the deviation from the plan is due to causes within the control of the company. This process contributes to the conversion of the plan from wishful thinking to a means by which the company is helped to exert control over its performance.

The steps in evaluation and control are:

1          Decide what is to be measured.

2          Decide how it is to be measured.

3          Interpret the outcomes.

4          Convert into policies.

Potentially effective control methods were identified in a survey of major British companies; the study attempted to isolate those factors which make it possible to exercise strategic control. The general conclusions were as follows:

•           The first stage in the control process should involve the selection of relatively few appropriate objectives.

•           From these objectives suitable targets can be derived so that pressure can be created for effective strategic performance, but without setting up a bureaucracy to achieve it.

•           A series of milestones can be identified which are tracked over time; these serve as benchmarks for evaluating strategic performance, and provide early warning of deviations from expected outcomes.

•           A narrow set of financial measures cannot provide the overall strategic view which is necessary; on the other hand, many of the objectives and targets cannot be measured with accuracy, and a great deal of subjective evaluation is necessary.

Monitoring Market Performance

The marketing department’s objective is to achieve sales in accordance with the plan, but as events unfold it is likely to be found that the costs and benefits of attempting to perform strictly in accordance with the plan’s objectives will change significantly. For example, at the outset it will be decided that achievement of a 12 per cent target market share requires a particular combination of increases in marketing expenditure and price reductions; as time progresses experience will tell whether the marketing effort has been effectively directed, and whether prices have been set low enough. It may turn out that the strategy was correct in its general approach, but that market share is currently 10.5 per cent and a much more aggressive pricing policy is necessary to achieve the planned objective of 12 per cent. Should the plan now be revised in the light of events?

The issue can be put in perspective by recourse to the basic income and cost model, which can be set out as:

Net Income = Total Market x Market Share

            X (Price – Unit Cost)

            – Marketing Expenditure

It is then a relatively simple matter to investigate different scenarios of the impact of variations in price and marketing expenditure on net income streams. This type of scenario evaluation would already have been carried out during the strategy choice stage, and it is now possible to update the scenarios on the basis of additional market information.

Monitoring Profitability

There are many ways of measuring the profitability of a company, and different answers can be obtained depending on which approach and which set of conventions is used. It would clearly be folly to track a profitability measure which generated misleading information on company performance. On the other hand, profit measures should not be discarded just because they are imperfect; each profit measure conveys a different set of information.

Profit

What is meant by profit in practice? The accounting definition concentrates on the difference between income from sales and costs of production. There are many ways of arriving at the accounting figure, depending on what is included in production costs. For example, some methods allocate overheads according to the value of sales, and others according to wage costs; machinery costs may be allocated over time by straight line depreciation, or by using a decay curve. Thus the profit calculated for a particular SBU depends on how such costs are calculated.

Since there is considerable discretion involved in arriving at a profit figure, trends in profit may be of limited use as a performance measure if arbitrary cost allocation is involved in the calculation. There is very little point in managers attempting to maximise a profit measure which is generated by obscure accounting conventions and which conceals rather than reveals company performance.

Net Contribution

One of the simplest measures of product performance is net contribution (also known as gross profit), which is defined here as:

Net Contribution       = Sales Revenue – Cost of Goods Sold

= Total Market x Market Share x Price

                                    – Unit Cost x Sales

Net contribution is an indicator of how effectively inputs are being converted into outputs. However, it may not be a good indicator of cash flows from current production. This is because not all output is necessarily produced in the period in which it is sold. For example, a large proportion of sales in a period may be from inventory, and despite the fact that net contribution may be low, actual cash flows could be much higher because the costs were actually incurred in previous time periods. It is unlikely that output and sales will be perfectly matched in a particular period; this is because of the difficulties of controlling production and estimating demand.

But even if output and sales are reasonably well correlated over a period, net contribution on its own cannot be used to decide whether or not to abandon a product. For example, net contribution can be expected to vary over the product life cycle, as demand for the product increases and decreases, and as the company moves up the experience curve.

The cash flows show how the company’s resources might be allocated to maintain and develop its portfolio. This, of course, has to be viewed in the light of the company’s access to capital markets, dividend policy, and gearing.

 Cash Flow

Cash flow is an aggregate view of profitability which looks at all inflows and outflows. In principle, the calculation of cash flow takes into account only actual income and expenditure, does not impute profitability by allocating costs, and ignores the net contributions of individual products.

 Cash Flow = Total Income – Total Expenditure

 Income includes sales of assets and new debt, and expenditure includes capital equipment and the repayment of debt; cash flow could therefore be dominated in some periods by changes in the company’s portfolio of assets. If cash flow is positive then reserves are increased and/or net debt decreased. If cash flow is negative, it stands to reason that reserves are decreased and/or net debt increased, if a strategy involves a period of expansion during which cash flows are expected to be negative, steps must be taken to ensure that finance in the form of reserves and/or borrowing will be available. The ultimate constraint on a company’s operations is the availability of cash; if the business is not able to generate cash in the form of earnings or borrowing it will come to a grinding halt. There are numerous examples of companies which have run into problems because they have not monitored and predicted cash flow implications. When the market disagrees with the company about the desirability of an investment programme, it follows that the company will have to finance it from internal cash; if this cash runs out the market has even more justification for not lending to the company, because of the poor foresight of its managers in the face of market scepticism.

4.5.1 BRAND-SPECIFIC EVALUATION

Brand evaluation is vital to the success of the brand. It enables brand owners to see where the brand’s strengths and weaknesses lie and what forces are driving these, which in turn points to the nature and level of investment needed to fulfil the brand’s potential. Measuring brand performance is an integral part of brand management.

A thorough evaluation looks not only at the financial value of the brand but also at the brand equity – the intangible elements of a brand that distinguish it in the mind of the consumer. But how is something as intangible as brand value actually measured?

• · Brands as intangibles

>Business value is increasingly driven by intangible assets such as brands. There has been a marked shift from a manufacturing economy towards a service economy and then to an information economy.

>Brands are a key element, along with other intangibles such as intellectual property and staff skills and commitment. Often 40-75% of a company’s assets may be attributed to brands.

Evaluation based on Brand equity

“The most valuable part of the brand … the added value bit … the bit that protects respectable margins and fills up the reservoirs of future cashflow … the bit that distinguishes a brand from a mere product … doesn’t belong to it. It belongs to the public.” [Jeremy Bullmore, British Brands Group, 2001]

Brand equity is defined as the sum total of learning about the brand by all stakeholders, including consumers, shareholders and employees. It includes all that people feel and think about the brand as a result of direct experience, word-of-mouth; moments-of-truth with the brand and the brand’s marketing activities. It constitutes a storehouse of future cash-flow and profits.

Good measures of brand equity can give indications as to the future profit trends. If brand equity is falling, you’re storing up trouble for yourself. If brand equity is rising, you’re investing in future performance, even if it’s not showing through in profits today.

w Four properties of brand equity:

> Brand awareness is an often undervalued asset; however, awareness has been shown to affect perceptions and even taste. People like the familiar and are prepared to ascribe all sorts of good attitudes to items that are familiar to them. The Intel Inside campaign has dramatically transferred awareness into perceptions of technological superiority and market acceptance.

> Perceived quality is a special type of association, partly because it influences brand associations in many contexts and partly because it has been empirically shown to affect profitability (as measured by both ROI and stock return).

> Brand associations can be anything that connects the customer to the brand. It can include user imagery, product attributes, use situations, organisational associations, brand personality and symbols. Much of brand management involves determining what associations to develop and then creating programs that will link the associations to the brand.

> Brand loyalty is at the heart of any brand’s value. The concept is to strengthen the size and intensity of each loyalty segment. A brand with a small but intensely loyal customer base can have significant equity.

Brand equity determines a brand’s health and strength as well as its financial value. Consistent measures of brand equity can help understand a brand’s progress towards its goals. Although these measures need to be adapted to a particular business context and reflect the brand’s strategic milestones, a mix of the following approaches is recommended:

>Inputs: the amount of advertising and communication spend as a percentage of sales. For many industries this is a prime driver of brand equity. This category can also include other internal measures, such as ‘innovation support’ and other cultural attributes.

>Intermediate measures: these try to uncover the stakeholders’ awareness and perception of the brand as well as their attitude towards it, relative to competitors. Uncovering issues, such as consumer satisfaction or perceived quality, through qualitative research can help the brand owner understand consumer motivations (or lack thereof) to purchase.

>Behaviour: how stakeholders actually behave. Sales are a key metric here, alongside market share, customer retention, loyalty and frequency of purchase.

Evaluating the brand’s equity is essential to defining efficient and effective:

>Consumer strategies: which markets provide most potential?

>Marketing strategies: which aspect of the marketing mix needs more focus?

>Budget allocation: how much to invest and in what?

>Performance tracking: how are we performing over time and in relation to competitors?

By understanding the strength of the consumer relationship with the brand, one can start to gauge how vulnerable the brand is to new entrants or to short-term promotions, as well as how much can be changed without ‘alienating’ loyal customers. 

wAlternative brand equity measures

Several proprietary models based on worldwide market research have been developed to measure brand equity.

1. The Brand Asset Valuator framework (Figure below) is based on consumer perceptions using a consumer questionnaire that measures four main areas.

Figure: The Brand Asset Valuator framework

Four areas:

Differentiation: how distinctive is the brand in the marketplace?

>Relevance: how relevant is the brand to the consumer?

>Esteem: how highly does the consumer regard the brand?

>Knowledge: how well does the consumer understand what the brand stands for?

Scores against the first and second dimensions are multiplied together to produce a measure of ‘brand strength’. Scores against the third and fourth dimensions are multiplied together to produce a measure of ‘brand stature’. This approach concentrates on the consumer, at the expense of more business-orientated measures such as market share or sales trends.

2. Brand Equity Ten

David Aaker [IPA, 1996] put forward this approach which scores brands against the following:

Loyalty measures

1. Price premium

2. Satisfaction/loyalty

Perceived quality/leadership measures

3. Perceived quality

4. Leadership/popularity

Associations/differentiation measures

5. Perceived value

6. Brand personality

7. Organisational associations

Awareness measures

8. Brand awareness

Market behaviour measures

9. Market share

10. Market price/distribution coverage

This list includes a balance of attitude, behavior and marketing measures with no prescribed weighting on each element. Aaker recommends tailoring this approach to each brand’s specific circumstances.

CHAPTER 5: STRATEGIC PLAN:

United Hospital should go for frontal attack by increase the promotional activities to attract more customers. They have to take initiatives to recognize their brand to the people. In the promotional activity they should use emotional appeal or slice of life, so that people will relate their want with the promotion of United Hospital and they will buy their medical service.

United Hospital should first retain the position in the market. They should follow defense strategy to defend their existed service.

United Hospital can go for a strategic alliance with the medical colleges in Bangladesh to provide them with best doctors graduated from these colleges.

They can make alliances with the foreign medical societies. It will ensure that foreign qualified doctors will come to United Hospital and provide them services.

Telecommunication and use of internet has become very easy to access. Bangladesh governments aim is to make digital Bangladesh. United Hospital can take this opportunity making alliances with foreign reputed hospitals. UHL can arrange a teleconference session for the patients with foreign specialist. It will help both parties. United Hospital will gain profit by arranging the service and foreign hospital will gain profit by providing the service to the patient. The patients’ will be benefited as it will reduce the cost of the service.

United hospital should increase their promotional activities to increase their Brand recognition. Brand recognition will help United Hospital by leaning people toward their hospital while health problems arise.

Top level management of united hospital must recognize the importance of brand recognition. To have an effective promotional campaign they could hire ad agency.

To capture most of the market share higher brand recognition is must. Brand which has higher recognition can sell them. Like other success factors brand recognition is also started with recognizing customer’s demand. What services really the target customers want to united hospital. Also selecting the target customers are also important in this process.

Commitment of the customers to united hospital is significantly low. Therefore, retention rate is also low. To keep the profitability higher customer retention is an important factor.

Higher customer retention will improve brand image. With higher retention rate will help united hospital to enjoy consistence profitability in the short term as well as in the long term. This will also attract new customers by generating positive word of mouth by the existence customers.

Top level management has to develop a framework and according to that they should conduct research time to time also they could look out for competitors success factors. They also could take expert help from outside their hospital to conduct such research.

Reference:

Moniruzzaman, M. (2006), Strategic marketing: Strategic analysis

Web site of United

Hospital Ltd.