Over the past few decades, the world has experienced a growth in the population leading to an increase in the diseases. One of the millennium development goals centers on the eradication of diseases to achieve a healthy population (Dameh, 2009). To achieve the stated purpose, most nations across the globe have invested heavily in their respective health sectors to help promote health for their citizens. In the past few decades, the global healthcare sector has achieved major changes due to the integration of new technology in the sector.
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The objective of integrating technology in the health sector has been to improve the quality of health against the backdrop of the increasing cost of health. The rapidly growing population in some cities has been attributed to the challenges experienced in the health sector. The increasing population has facilitated a partnership between the governments and the private sector to fill the gap that exists in the healthcare sector. Dubai and Riyadh are among the cities that have experienced high population growth in the recent past causing a shortage in the number of healthcare facilities in the region. Additionally, the two cities suffer from a shortage of qualified healthcare personnel leading to poor services for the clients.
The evolution of the middle class has contributed to the rising need for private healthcare facilities since the wealthier individuals prefer better services at a higher fee to poor services at a reduced cost. This paper seeks to compare and contrast the healthcare sectors for three cities namely, Dubai, Riyadh, and Munich. To achieve the comparison, the paper shall employ the following tools:
- The 5 Forces
- Intensive strategy
- Integration strategy
- SWOT Matrix
Analysis of Dubai through the five forces
Industry rivalry (high)
Competition is low among Dubai’s health sector owing to the growing number of private hospitals and the evolution of the middle class. Technology has also contributed to the growth of rivalry in the health sector with the private hospitals adopting the most recent technology to improve patient’s health. The high-earning employees in the city procure services from the private hospitals while the low earners get such services from the public sector (Sharif & Blair, 2010). The services at the private facilities are far much better than the services offered by the public sector.
The threat of substitutes (moderate)
The threat of substitutes is high owing to the presence of private healthcare providers. Currently, there are about 21 private hospitals in the city. The rapidly growing population is expected to attract more investors in the future leading to a higher threat of substitutes.
Bargaining power of suppliers (High)
The big hospitals in the city enjoy economies of scale when procuring the drugs and other related medical equipment. The discounts obtained by such facilities enable them to lower their fees attracting more customers. Currently, there are about 21 private hospitals and 4 public in the city that handle thousands of customers each day. The growing population coupled with the increase in chronic illnesses causes a high turnover for drugs. Therefore, the bargaining power of the suppliers in Dubai is relatively high.
The threat of new entrants (High)
The rapidly rising population had led to an increase in the number of patients causing a need for more hospitals to avoid congestion. Local and foreign investors have penetrated Dubai to exploit the business opportunity resulting from the increased demand for healthcare.
Bargaining power of buyers (Low)
The bargaining power of buyers is low due to the shortage of hospitals in the city. Currently, the city experiences a shortage of healthcare facilities. Patients, therefore, have to scramble for the few hospitals available. In the private sector, however, patients tend to go for hospitals that offer better services at an affordable fee (Hvidt, 2009).
Analysis of Riyadh through the five forces
Industry rivalry (High)
The rapidly growing population in Riyadh has led to the need for more hospitals in the region to benefit from the booming business. The city has experienced an increase in the number of private hospitals in the past few decades. The increase in the number of hospitals contributes to competition among the players as the private sector seeks to maximize their profits. Thus, competition is high due to the presence of private local and foreign investors in the health sector. The huge investment made by the government in an attempt to make the health sector better has increased the competition between the public and private hospitals.
The threat of substitutes (High)
The threat of new entrants is high in Riyadh due to the existence of many hospitals in the city. The private sector has grown tremendously due to the increased investment in the health sector and the increased acquisition of health insurance policies by the citizens. The evolution of the middle class has also led to an increase in the number of private investors. Initially, the public sector was the main healthcare provider. However, in the recent past, the private sector has emerged and tends to offer better services than the public sector.
Bargaining power of suppliers (High)
The huge budget devoted to the purchase of healthcare equipment has facilitated the procurement of the necessary goods on a large scale. Purchasing such goods on a large scale has facilitated the offering of discounts by the suppliers in a bid to attract the purchasers. The increase in the number of clients both in the public and the private sector has increased the total consumption of the healthcare goods leading to increased purchases. Additionally, the government has the option to choose where to procure the commodities due to the growing number of suppliers. The bargaining power of suppliers is, therefore, high.
The threat of new entrants (High)
The threat of new entrants in the city’s healthcare sector is high owing to the opening up of the sector to foreign and local private investors. The healthcare business is booming owing to the increased number of people in the region (Giaimo, 2009). The threat is compounded by the problem of unemployment that is a major issue facing most cities in the world. The unemployed healthcare professionals tend to open private hospitals.
Buyers bargaining power (High)
The bargaining power of buyers in Riyadh is low owing to the shortages of healthcare facilities in the city. In government hospitals, the cost of services is relatively lower as compared to that in private hospitals. The low costs have been facilitated by the government’s subsidization of the healthcare services to ensure that every citizen can access such care.
Analysis of Munich through the five forces
Industry rivalry (low)
The rivalry in Munich’s health sector is minimal due to the unified pricing system in the city. Under the system, the government regulates the healthcare fees charged by both the public and the private hospitals across the city. The system has been the greatest barrier to the private investors who perceive the system as one that cannot facilitate quality services for a higher fee.
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Suppliers bargaining power (Low)
The government of Germany regulates the pricing of pharmaceutical products and an increase in the price of a drug must be due to an increase in value (Sinha & Kohnke, 2009). The strict laws on prices reduce the supplier’s bargaining power. Another factor that leads to low supplier bargaining power is the presence of many suppliers of pharmaceutical products. The buyers may procure the commodities from suppliers who sell the products at a fairer price.
The threat of new entry (Low)
The threat of new entry in Munich is minimal owing to the government’s control of the healthcare fees. The laws on the prices have barred investors from investing in the sector for fear of increased risk. Additionally, the high cost of drugs and healthcare equipment needs a huge investment with no guaranteed returns. This view keeps off private investors.
Buyers bargaining power (High)
The buyers’ bargaining power is high owing to the availability of different healthcare facilities. Patients will tend to go to hospitals that offer the best services. The unification of the healthcare fees has contributed to the high buyers’ bargaining power in that customers may obtain services from other health providers charging relatively lower prices.
The threat of substitutes (High)
The threat of substitutes is high owing to the presence of many hospitals offering similar services. Munich hosts numerous hospitals including the Schwabinger Hospital, Harlachinger Hospital, and the University of Munich Hospital (Crone, 2008). Germany is the major producer of pharmaceutical products hence the drugs available in different hospitals may be the same.
|-The huge governmental investment in the health sector |
– The unification of the healthcare prices in Munich
|-The insufficient number of health facilities in all cities |
-The inadequacy of qualified healthcare professionals
-Congestion in both the private and the private sector
– The inadequacy of beds to facilitate inpatient services
|_The increasing population in both the Riyadh and Dubai |
-The growth in new technology is expected to boost the healthcare sector. —Mergers and acquisition to minimize competition and expand the market share of the individual firms in Munich
|– The increasing population in Dubai and Riyadh |
-The increased investment by the government is a threat to the private sector.
The huge governmental investment in the health sector is a major strength of the public healthcare sector in both Dubai and Riyadh. In the past few decades, the governments of the respective states have increased the annual healthcare budget leading to increased staff and better services to customers. However, the private sector may suffer from the loss of customers because of the investments. The main strength of Munich’s healthcare sector, on the other hand, is the unification of the prices of healthcare.
The current number of health facilities in all the cities is insufficient to accommodate the rising number of people in need of healthcare services. The inadequacy of qualified healthcare professionals also poses great challenges to the healthcare sectors in the three cities. The increase in the patients has led to congestion in both the private and the private sector. Additionally, the currently available hospitals suffer from inadequacy of beds to facilitate inpatient services.
The increasing population in both Riyadh and Dubai presents an opportunity for the private sector to expand due to the increased demand for healthcare services (Hvidt, 2009). Investors should take advantage of the increased population to maximize their gains by establishing new private hospitals. The growth in the new technology is expected to boost the healthcare sector since it will facilitate research and the storage of records electronically. The opportunities in Munich include mergers and acquisitions to minimize competition and to expand the market share of the individual firms.
The increasing population is the main threat to healthcare in both Dubai and Riyadh. The increased investment by the government in an attempt to subsidize healthcare in the public facilities is a major threat to the private sector. The private sector may lose customers to the public sector owing to the reduced prices charged in public hospitals.
Analysis of Dubai using the intensive strategy
The high population in Dubai facilitates the expansion of market share for the present services. The increasing population presents more opportunities for the firms to expand the market share in the backdrop of the rising need for healthcare services (Giaimo, 2009). Some of the areas that may help increase the market share for the hospitals include children’s health, chronic disease treatment, and maternal services just to mention.
Dubai presents an opportunity for industry players to expand their market share in other geographical areas. The increased need for health services owing to the increased population growth facilitates the opening of branches in other cities. The private sector has the greatest opportunity to grow owing to the government’s failure to offer quality services to the clients. The private sector seeking to expand its market share through the opening of new branches may take advantage of the new technology to maximize customers’ experience. The technology facilitates the storage of patients’ information and the sharing of such data by the authorized individuals.
To achieve increased turnover, hospitals need to remain innovative to improve the services offered to customers. The low competition present in Dubai does not require strict measures to increase the turnover due to the low buyer bargaining power caused by a shortage in the number of hospitals in the region. However, firms may increase their profits by taking advantage of the new technology to maximize customer experience through improved customer experienced and reduced cost facilitated by the use of technology. Low costs for the services coupled with the improved patient outcome will lead to increased customers for the business in question.
Analysis of Riyadh using the intensive strategy
Market penetration for Riyadh does not require much effort due to the increased demand for healthcare services (Almalki, FitzGerald, & Clark, 2011). However, firms intending to maximize the customers with the present products need to increase the customers’ experience by handling them with respect and by expanding their capacity. For example, firms may increase the number of beds to take advantage of the gaps in inpatient services. Currently, the Riyadh n inpatient services are not adequately met by the available facilities. Increasing the number of healthcare staff may also facilitate the strategy towards maximizing the market share for the present products in the present market.
Just like Dubai, the Riyadh health sector suffers from a shortage of hospitals causing congestions in the available hospitals. Many patients leave unattended in the currently available hospitals due to the inadequacy of staff and the minimal number of health facilities. The shortages facilitate the opening of branches to offer services to the unattended. Therefore, the Riyadh healthcare market presents an opportunity for investors to open up branches to increase their total customers.
Currently, the services offered by both the public and the private health facilities are not good enough due to overcrowding and lack of qualified physicians. The services are specifically worse in the public sector due to bureaucracy evident in most governmental facilities (Sharif & Blair, 2010). Private investors may take advantage of the current situation to increase their profitability by improving the quality of services in specific firms. Besides, the evolution of the middle class may be a great opportunity for investors to make profits in exchange for improved services. The wealthier persons in the society will tend to go for classy services irrespective of the fee charged.
Analysis of Munich using the intensive strategy
The application of the market penetration strategy in Munich would be a great task owing to the high competition that exists in the healthcare sector. The investors need to offer exceptional services to customers to attract them to their organization. The city has a unified system of pricing meaning that the government determines the fee charged by different hospitals. In that regard, the availability of substitutes may be a great challenge to an organization’s endeavor to increase the market share of the present services in the present market.
The unification of the fees charged by the healthcare facilities in Germany limits a firm’s ability to charge higher prices for quality products. In that regard, private investors may consider opening new branches in other areas in the city to increase the number of customers handled by the facility per day. This aspect could be a sure way of increasing turnover and maximizing profits. Additionally, this would facilitate the spread of risk since losses incurred by a subsidiary may be set off by the profits from a branch in another area.
The idea of improving the quality to increase sales may not be a good idea in Munich since the fees charged for the services is unified. In that regard, the investors may not charge higher prices for superior products. However, the healthcare firms may embark on research and invest in the new technology to facilitate evidence-based healthcare services to improve the customer experience (Folland, Goodman, & Stano, 2007). Better quality services to clients may go a long way in giving the concerned firm a sustainable competitive advantage over the rivals.
Analysis using the integration strategy
The integration strategy refers to the merger of companies to increase their market share and to reduce competition through increased economies of scale. Firms integrate to increase their market share and to benefit from the economies of scale.
In both Dubai and Riyadh, private investors may invoke the strategy to take advantage of the high demand for healthcare in the respective cities. As it stands now, the available hospitals are not in a position to meet the needs of all customers. Additionally, the services at both the public and the private healthcare sectors are poor due to congestion and lack of qualified staff. The private investors, therefore, may merge to provide quality services at a higher fee.
The emergence of the middle class may facilitate the endeavor since such groups are willing to pay more for better services. In Riyadh, every individual in the city has an insurance policy that caters to both the inpatient and outpatient services. The insurance covers may facilitate the provision of quality services at a considerably higher fee. Vertical integration would fit both Dubai and Riyadh (Dameh, 2009). This type of integration would involve a merger between recognizable hospitals with small hospitals in the regions.
Integration in the case of Munich is equally inevitable given the nature of competition and the availability of substitutes. In Munich, however, such mergers and acquisitions would be stimulated by the need to cope with competition that is evident in the health sector as opposed to the provision of quality services for higher charges. As mentioned previously in this paper, the German government regulates the fees charged by the health facilities across the city (Sharif & Blair, 2010).
The mentioned fact increases the competition between the public and the private firms due to the availability of substitutes. However, since such mergers may be inevitable, the private investors shy off from investing in the city for fear of diminished profits. Germany regulates not only the fee charged to customers in the healthcare facilities but also the prices of drugs from the local pharmaceutical factories. A horizontal kind of integration would fit Munich as opposed to a vertical integration proposed for Dubai and Riyadh.
Analysis using BCG
BCG classifies businesses into four categories based on the market share and the investment required to set the business. The four categories are described hereafter:
- The dogs-The dogs have low market share leading to diminished, returns and they should be avoided at all costs.
- The cash cows -The cash cows have a high market share but low growth rates.
- The stars-The stars require a huge amount of cash to start, but they equally generate a high amount of cash. They have a high market share and high returns.
- Question marks-Questions marks have high growth rates but low market share leading to low profits to the concerned firm.
Based on the components described above, Riyadh and Dubai’s healthcare sector may be classified in the stars category. As indicated above, the star is characterized by high growth coupled with a large market share. The population in the duo cities is growing at very speedy rates increasing the need for more hospitals to meet the health needs of the populace. The result is that the health facilities in the regions have big market shares leading to increased returns.
Munich’s healthcare market, on the other hand, may only be classified in the question mark class. The mentioned class is characterized by high growth and reduced market share (Sinha & Kohnke, 2009). Despite the high growth in the number of diseases in Germany, the government regulates the fee charged by the health facilities. This aspect leads to the availability of substitutes, which causes stiff competition among the various healthcare organizations in the city. In turn, the increased competition leads to reduced market share for the concerned firms.
Analysis using CPM Matrix
A competitive profile matrix (CPM) compares an organization with its rivals to determine its strengths and weakness. The matrix is used to inform the interested parties about the source of competitive advantage for the organization in question (Crone, 2008). An analysis of Dubai, Riyadh, and Munich is done hereafter:
|Key success factors||Weight||Rating||Weighted score||Rating||Weighted score||Rating||Weighted score|
The table places Munich’s healthcare sector at the top of the competition. The city’s healthcare sector is the best among the three explored cities. Munich scores high in all the aspects examined by the author. The high score for Munich may be attributed to the high number of hospitals available in the city as compared to the number of health facilities in other cities. Both Riyadh and Dubai have a shortage of health facilities leading to poor quality of health in the available facilities. Additionally, the two cities demonstrated as weak have shortages of qualified staff. Such factors may all contribute to their low rating in the CPM Matrix.
Recommendations for Dubai
Currently, Dubai faces a shortage of healthcare staff causing poor quality of services and an increase in the mortality rates. The government should consider investing in health care staff to increase their productivity. The government should specifically hire more health care workers to improve health for its citizens. The government should offer incentives meant to stimulate enrollment for courses related to the listed fields.
Such incentives include partial and full scholarships, job guarantees, and better salaries just to mention a few. Besides, the government should increase the number of medical universities to offer medical courses to interested learners. A staff-training program should be put in place to facilitate continuous learning for healthcare workers. Research indicates that the absence of a sound training program denies workers an opportunity to adapt to the rapidly changing health needs of the clients (Almalki et al., 2011). The government should invest in research to increase evidence-based practices in the healthcare sector.
The promotion of Electronic Health Records is another action that is recommendable for Dubai. The city should invest in electronic health records to improve patient health. Electronic health records minimize medical errors hence increasing patient outcomes. Additionally, electronic health facilitates the sharing of important information among the health workers making the work of nurses and other healthcare employees easier. The government should promote evidence-based practices in the healthcare sector to improve quality. To achieve the stated goal, the government should invest in research to facilitate the gathering of evidence helpful in the health sector.
Lastly, to deal with the overcrowding experienced in the Dubai health facilities, the government should partner with the private sector to increase the number of healthcare facilities in the city. Additionally, the government should subsidize the health insurance costs to enable citizens to acquire such policies. The insurance policies should be devised in such a way that they cover both inpatient and outpatient services. Currently, only the inpatient services are covered by insurance plans. Consequently, patients tend to request the inpatient services to benefit from the insurance covers increasing the doctors’ work.
This paper compares the health sectors of three main cities in the world namely Dubai, Riyadh, and Munich using six different tools. The SWOT matrix tends to indicate that Dubai and Riyadh have some similarities in terms of strengths and weaknesses. Both cities have similar issues that revolve around shortages of healthcare facilities coupled with the inadequacy of staff. Munich, on the other hand, tends to exhibit strengths over Dubai and Riyadh in that it has a unified price system.
The analysis using the 5 forces and the BCG shows both Dubai and Riyadh as the two cities where investors may invest their money to benefit from the booming business of healthcare services. The two cities have experienced rapid growth in the population over the past few decades causing a need for more healthcare facilities. On the contrary, investors find Munich less attractive due to the price unification system applicable in the health sector.
The integration strategy shows the possibility of using mergers and acquisitions in all three cities to benefit from increased competitive advantage. However, the analysis proposes a vertical integration for Dubai and Riyadh and a horizontal integration for Munich. On the other hand, the intensive strategy indicates that Dubai and Riyadh offers a good opportunity for expansion as opposed to Munich. Lastly, the CPM Matrix shows Munich as being superior to Dubai and Riyadh in terms of competitive advantage.
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