Strategic Management in Healthcare Industry

Strategic Management in Healthcare Industry


The given paper discusses strategic management of a pharmaceutical firm. Currently, the pharmaceutical industry is among the key ones, as the goods it produces are used for treatment and preservation of life and health of the population. Moreover, by being an extremely demanding and high-tech-based, it is able to offer working places to broad sections of the population and apply various untapped resources. Currently, the pharmaceutical industry is one of the most successful and influential sectors that deserve attention. Therefore, all the above mentioned facts contribute to the relevance of the research, which is aimed at defining the influence of various factors on the company working in this industry, namely in the long-term perspective (from five to ten years).

Socioeconomic Factors

Since the pharmaceutical firm does not usually come in direct contact with the population (the drugs are often sold by the intermediaries), it is possible to say that the most significant socioeconomic factors that influence it include the aging of the population, namely the employee base. In particular, despite the high level of total unemployment in the country, pharmaceutical firms are always in need of new laboratory technicians. The average age of technicians in clinical laboratories reaches approximately 50 years. As a result, these workers quickly reach the retirement age, and it is rather difficult to find the substitute due to the gradual decline in the number of people trained in this area (Kayne, 2005). In the case such tendencies are preserved for the next five or ten years, the firm will experience the shortage of the qualified staff, which will have a negative effect both on the quality and quantity of its production, and, therefore, the revenues.

Legislative Factors

The pharmaceutical firm is obliged to act in accordance with both federal and state legislation. The most significant impact of the federal legislation on the pharmaceutics can be considered the Healthcare Reform of 2010. Namely, it regulates the coverage of the prescription medication under the Medicare program to avoid the percentage of money paid by the state from exceeding 75% (a coverage gap) (Chisholm-Burns et al., 2014). In particular, the state obliges the pharmaceutical manufacturers to provide a 50% discount on brand-name medicine in this coverage gap. By being combined with the growing number of people using Medicare, this factor may lead to huge profit losses for the company in the following ten years, making the option of switching to the production of the generic drugs for the next five years the best solution. As for the state legislation, the cost-saving initiatives may force the company to not only improve its utilization system, but (in the following five years) also to rebuild its supply chains in order to achieve maximum cost efficiency (Chisholm-Burns et al., 2014).

Policy Factors

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The interaction of the pharmaceutical firm with the government agencies, namely the Joint Council on the Accreditation of Healthcare Organizations (JCAHO), is manifested in the financial support of the company from the federal budget (in the case the firm is considered to be of a vital importance for the local economy). It can also be seen in the provision of the certain quality standards and certificates for the firms products and the accreditation for the company (Moseley, 2009). Therefore, the policy factors will have a significant effect on the firm in the long-term perspective. In particular, by earning the accreditation from JCAHO in the next five years, as well as producing certificated goods, the company may strive to enter the top list of the states healthcare facilities, thus improving its competitiveness. At the same time, this fact will make it possible for the company to become a recipient of the financial aid in the future, ensuring its survivability in the conditions of the global economic crisis, which is forecasted to occur in the following years.

Organizational Factors

Currently, the problems are present with recruiting and retaining the laboratory technicians. As was mentioned before, the number of qualified workforce has decreased, and the educational programs for these positions have been exhausted. As a result, in the long-term perspective, the firm will have to implement its own education program for the employees who are directly engaged in the lab work. Moreover, in order to retain the employees, it can be useful to consider giving them more authority. In turn, such initiative will require making certain changes in the companys organizational structure (Peterson & Kelly, 2015). Thus, the firm will experience an increase in the administrative costs in the following five years due to the implementation of the education program and structural changes. However, in a period of five to ten years, it will be possible to reduce the shortage of the qualified staff within the company as well as make the position of laboratory technician more attractive for the new recruits.

Service Delivery Factors

For the pharmaceutical firm, the most significant service delivery factor is the rapid development of the information technologies (IT). Currently, many people prefer ordering a variety of products, including drugs, via the Internet. Thus, it is possible not only to shorten the supply chain by offering the goods directly to the customers, but also providing them with additional information on the products and receive feedback from them (Chisholm-Burns et al., 2014). As a result, in the following five years (given the rapid temps of the IT development), the firms consumer base will extend, improving both the financial state and credibility of the organization. Moreover, it will be possible to reduce the logistics costs, once again, increasing the profits.

Technological Factors

One of the primary technological factors includes scientific breakthroughs and research in the field of pharmacy. In the long-term perspective, the constant development of the new and efficient drugs will allow the firm to improve its competitive position on the market (Edington, 2009). Another important factor is the rapid development of technology, namely the robotics. Due to industrial robots in laboratories, biological and pharmaceutical industries can perform tasks beyond human capabilities. In particular, they can work in hazardous conditions in the vicinity of biohazard and toxic compounds. Moreover, they can assemble and package a variety of medical devices and materials (Chisholm-Burns et al., 2014). As a result, in the long-term perspective, namely in ten years, such technological advancements will allow the firm to address the mentioned problem of personnel shortage and optimize the production process in terms of quality and efficiency. Moreover, the mentioned factors may also make the company an innovator in the eyes of the publicity, strengthening its position in the following years.

Current Economic Factors

The last financial crisis has negatively affected such factors as GDP, interest and exchange rates. In turn, valuations, property rents and utilities have also increased, leading to the growth of the expenditures of the organization. As a result, the company is forced to increase the price on the drugs, namely the brand-name ones, leading to a strain on Medicare and Medicaid. The doctors often refuse to work with the patients covered by these programs, i.e. fewer drugs are being purchased (Chisholm-Burns et al., 2014). In the long-term perspective (from five to ten years), without any changes in the pricing policy, this may result in a profit loss for the company.

As a conclusion, it is possible to say that the impact of the abovementioned factors will be particularly significant in the long-term perspective. Therefore, it is imperative for the pharmaceutical firms management to take into account all the possible external and internal sources of influence in order to develop a comprehensive strategy ensuring the survivability and prosperity of the organization in the following years.

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