Executive Summary
Conexia is one of the leading providers of RTA solution in Argentina. The firm is currently planning to make an entry into the United States. Before doing so, it will be necessary to analyse its current capacity in order to determine the most appropriate approach it can use.
It will also be necessary to analyse its current value chain in the Argentine market and determine its appropriateness in the new market. The top management will need to find an appropriate partner that already understands the United States’ market.
The United States IT healthcare market has made great advancements in the world today. However some of the recent changes brought by the Obamacare have introduced uncertainty in this market as players try to speculate about the future.
In order to conduct a comprehensive external environmental audit of this market, it will be necessary to use a number of tools in order to bring a clear understanding of the relevant forces that may affect Conexia as it seeks to enter this market (Barrett et al. 2010, p. 7). To conduct a systematic external environmental audit of this market, the researcher will use PESTLE, Porter’s Five Forces, Industry Life Cycle, and Competitor Analysis Models.
PESTLE Analysis
In order to conduct a comprehensive audit of the United States IT healthcare market, it will be necessary to use PESTLE model as shown in the figure below.
Figure 1: PESTLE Model
Political environment
According to MacLennan (2011, p. 90), when conducting an audit of a market, it is important to be as specific as possible. The political environment in the United States has been stable over the past decades. Under the leadership of President Barrack Obama, the country has seen a number of policies developed to protect the country from external threats, especially the international terrorists.
As Adetule (2011, p. 84) notes, this is one of the countries with advanced security systems meant to protect people and property. Bhal (2005, p. 382) also notes that the political class has abstained from direct interference with the business sector. The policies in this country are friendly both to the local and international investors. As it makes it entry into this market, Conexia will be certain that its operations will not be interfered with by the political class.
Economic environment
The economy of the United States suffered from the 2008/2009 economic recession that affected various sectors. The health sector was one of the sectors of the economy that were affected by this recession. However, Kline (2010, p. 45) notes that the United States has since regained positive growth and the purchasing power of its citizens has also increased within the past six years.
The health sector has also enjoyed a period of growth and development following various policy changes that are focused on improving the quality of healthcare services. The world’s leading economy has given serious attention to the healthcare centre in terms of direct government funding in order to make medical services accessible to all.
Social environment
According to Finlayson (2009, p. 28), the United States is one of the most diversified countries in the world. The products offered by Conexia may fit people of all demographical factors as long as they have insurance cover.
However, the marketing strategies used in this market must be conscious of this diversity in order to avoid cases of controversy that may make a section of the market to develop hatred towards the brand. This means that when operating in this market, marketing messages that may have racial connotations, male chauvinism, or other divisive issues should be avoided.
Technological environment
The United States is more technologically advanced than the home market for Conexia in Argentina. The government has been rolling plans to ensure that the paper records are replaced by electronic health records to increase efficiency and reduce costs (Watson 2006, p. 451). This means that if Conexia is able to package its online products properly in this market, it can experience phenomenon growth.
Legal environment
The Obamacare is one of the leading legislations that have revolutionised the healthcare sector. This legislation has increased the relevance of insurance firms in the healthcare sector. It has ensured that more Americans are insured in order to lower the cost of health (Dayal & Adhikari 2010, p. 478).
This means that the number of customers that will be served by this firm will be higher than that in the home country, making it a very lucrative market.
Ecological environment
The ecological factors in the United States may work in favour of this firm. According to Sipe and Frick (2009, p. 64), the United States’ government and other non-governmental institutions have developed programmes to help reduce environmental degradation.
One of the ways of doing this is to protect the forest cover. Using papers is a threat to the forest. The electronic system presented by Conexia is one of the best solutions that can be used to reduce the reliance on papers, to help conserve the environment.
Porters Five Forces
It may be necessary to use Porters Five Forces to analyse the United States IT healthcare market. The Five Forces model is shown in the figure below.
Figure 2: Porters Five Forces Model
Source (Bhatnagar 2006, p. 55)
As shown in the figure above, Conexia may have to deal with a number of threats when it enters the United States IT healthcare market. There is always the threat of new entrants that will increase the level of competition. This is a free market with no restriction to foreign firms willing to operate locally.
Conexia will also have to deal with the threat of substitutes. This country has embraced technology, especially in the healthcare sector, and some of the electronic systems in use may be considered substitute products. The bargaining power of the suppliers may also be an issue. However, the nature of products that this firm offer in the market reduces this threat.
This firm may have to deal with the strong bargaining power of its clients. Some of the large insurance providers control this industry (Bakacsi 2008, p. 83). This means that Conexia will have to operate as per the conditions set by these clients. Finally, it will be necessary to deal with the issue of competitive rivalry in the healthcare industry. The firm will need to develop superior marketing strategies that will give it an edge over its market rivals.
Industry Life Cycle
In is necessary to determine the industry life cycle in order to determine how prepared Conexia should be when planning to make an entry into the United States market. The figure below shows various stages in an industry’s life cycle.
Figure 3: Industry Life Cycle
Source (Chis, Kemp & Legge 2007, p. 91)
A critical review of the US healthcare market shows that the product that Conexia is offering falls in an industry that is at the introduction stage. (Annabelle 2013, p. 858) says that Real-Time Adjudication (RTA) is a relatively new product in the United States’ market. This is an advantage for this firm because it has the opportunity of expanding its market share very fast before competition sets in if it can convince the clients that this product is a necessity.
Competitor Analysis
Conducting a competitor analysis will also be important when conducting an environmental audit. This firm will have to deal with a number of competitors that offer similar products. One of the top brands that offer online medical software solutions is e-Clinic Works (Williams 2007, p. 46).
This firm offers electronic health records management systems. Its products are perfect substitutes for Conexia products. Other major firms that may pose competitive threat to this firm include McKesson, Allscripts, and Athena Health. Although these firms do not offer the exact products as that of Conexia, their solutions can be used as substitutes. Their experience in the American market also gives them a competitive edge over Conexia.
Before making an entry into a foreign market, Johnson, Whittington and Scholes (2011, p. 4) recommends that it is necessary to conduct an evaluation of the internal resources of a firm in order to determine its capacity to deal with the environmental forces in the new market. The article by Barrett et al. (2010, p. 8) reveals that Conexia has experienced relative success in the home market.
According to the financial statements of this firm in 2008, Conexia had an income of US 2.5 million, which was a 36% growth compared to what it had the previous year. This impressive performance was attributed to the ability of the firm to dominate the local market with its superior products.
These reports also reveal that in the same year, this firm had over 130 employees working in various departments. Currently, this firm is serving over twenty insurers, and the beneficiaries are estimated to be over 4 million people. The company projected a revenue growth of 64% through to 2012 (Barrett et al. 2010, p. 11).
Conexia value chain
In order to further evaluate the internal resources of this firm, it will be necessary to understand the value chain at this firm. The figure below identifies the specific activities at every stage in the value chain.
Figure 5: Value chain
Source (Abinash & Gupta 2005, p. 25)
Conexia is a provider of software solutions and hardware systems in terms of databases for its clients that make the communication between the health insurance provider and the healthcare provider happen in real time. Its software is developed and maintained by a team of experts employed by the firm.
However, the hardware is purchased from vendors such as IBM. The firm orders the hardware, especially the databases after receiving a request for installation from the clients. The inbound logistics at this firm involves receiving the hardware from the vendors.
Once this is received, the next stage is always the operations where the firm installs the system at the offices of the clients. The outbound logistics at this firm involves the replacement of the old or damaged databases or other hardware components of the system so that they can be replaced with new ones.
According to Aquinas (2006, p. 98), these first three stages of value chain needs software and hardware engineers who will ensure that the system is up and running as per the expectations of the clients. Both the insurance providers and healthcare institutions will prefer having a system that is easy to use, secure, and easy to maintain.
The next stage in the value chain is marketing. This is one of the most challenging stages. Convincing the clients that the products offered by the firm have the value they desire may not be a simple process. This is specifically so because the targeted market has little knowledge about RTA.
The marketing team will need to develop strategies that will help create knowledge in the targeted market. Finally, this firm will need to maintain these systems on a regular basis. Offering maintenance services is part of the value chain. It helps ensure that the clients are happy after making their purchases. Eliminating post-purchase dissonance is one of the best ways of maintaining a pool of loyal customers in the market (Awasthy & Gupta 2004, 291).
Conclusion about Opportunities and Threats
The American market offers a number of opportunities that Conexia should exploit as it seeks to expand its market share. The large American population that has health insurance offers a great opportunity that this firm should take advantage of as soon as it gets into the US market.
It should also take advantage of the advanced technology in this country. However, this market also has a number of threats that needs to be managed. It should be ready to deal with the threats of new entrants. The United States does not restrict new entry of firms, and this means that competition can get very stiff in the market (Williams 2007, p. 85). Government regulations may also affect its operations, especially on the quality of products expected. This firm must also be ready to deal with substitute products in this market.
When entering the US IT healthcare market, one of the best market entry modes that the firm can use is the strategic partnership approach. As Barrett et al. (2010, p. 11), observes, Conexia has a potential that can be maximised through internalisation strategies.
Bowles and Dong (1999, p. 19) say that strategic alliance helps reduce the cost of entry. It also increases the competitive advantage of the new firm in the new market. Ingenious Med is the best firm that Conexia can consider partnering with when entering the US IT healthcare market. The following are some of the justifications that make Ingenious Med the best partner for this firm.
Fit with core resources and capabilities
According to Gasch and Gasch (2010, p. 114), Indigenous Med is one of the EMR developers that have won the trust of many insurance companies. Its current products perfectly fit with the products offered by Conexia. In fact, they can be considered complementary products.
Ingenious Med is a brand that has become popular in the healthcare sector within the United States. It has built a strong name through its high quality products at a time when the United States is shifting from paper records to electronic system in the healthcare sector. Its current resources put it at the best position to partner with Conexia.
It has offices at strategic locations within this country. It has the right contacts that would otherwise take Conexia several years to acquire if it were to make a direct market entry into this market. It also has the right knowledge in this industry having been in this market for several years.
Its capacity to manage its own operations is impressive based on its financial resources. A partnership with this firm will offer it a rare opportunity to enter this market on a strong footing, without having to struggle with the common problems when setting up new offices in a foreign country (Biswas, Srivastava & Giri 2007, p. 34).
Fulfilling stakeholders’ requirements
A strategic partnership with this firm will also make it possible for Conexia to meet the requirements of its stakeholders in terms of profitability and ethical considerations. The shareholders at this firm need profits as soon as this firm makes an entry into the new market. A partnership with this strong brand will make this possible.
It already has a reliable market, and it will take a very short time before Conexia starts enjoying profits. Ingenious Med is also known for its values in the market, making it the most appropriate strategic partner that will help uphold values at this firm. Its ethical records in terms of delivering on its promise and maintaining customer satisfaction has earned it a reputation.
It is important to note that this strategic alliance between Conexia and Ingenious Med may face a number of issues at the implementation stage. According to Schuttler and Burdick (2010, p. 41), one of the biggest issues that always arise in such alliances is the guiding strategic objectives that guide the operations of the firm in the market.
In case the values of Conexia and Ingenious Med have any contradiction, then working together may pose serious challenges. Dwivedi (2002, p. 262) says that values always define how a firm operates and manages its clients and all other stakeholders. If the two firms cannot harmonise their values, then this can turn out to be a major issue that may affect their alliance.
According to McManus (2006, p. 132), another issue that always arise in such partnerships is how to redefine the management structure. Conexia is an independent firm with a clearly defined management structure, and so does Ingenious Med. When they come together as a unit, there might be a problem in defining the top leadership structure.
This may get serious if the two firms cannot make compromises on how to share the top leadership positions. Both may want to exercise some control over the new firm. However, this may not be possible, and they will be expected to make compromises in order to find a way of working together without wrangles.
Another implementation-led issue that may arise out of this alliance is the approach that will be used in hiring and managing the employees (Miller 2012, p. 89). Given that Conexia is getting into a new market that Ingenious Med has been operating for some time, Ingenious Med may be given the mandate of hiring new employees.
However, Conexia will also want to exercise control over these employees in order to ensure that its interests will be protected. Another big challenge in the implementation process will be how to share the costs of operations. Although this can easily be valued, the valuation process may be unacceptable to either party, making it complex to come to an agreement.
Similarly, the issue of sharing of profits may also arise (Kang & Singh 2006, p. 202). As shown in the article by As Barrett et al. (2010, p. 14), Conexia has struggled through the years and now it enjoys attractive profits in the home country. However, the firm will have to share its profits when it enters the United States’ market.
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