Relationship between Midwestern and Midwestern Medical Group - Case Study Example

Contents Contents 1 Key Issues 1 Directional Strategies 2 Situational Analysis 2 Company 2 Product line 2 Image in the market 2 Culture 2 Collaborators 2 Suppliers 2 Alliances 3 Customers 3 Competitors 3 Actual or potential 3 Weaknesses and Strength 3 Climate 3 Strategy Formulation 4 Implementation 4 Recommendations 4 Benchmarks 5 Key Issues There are a number of different issues in the relationship that was established between Midwestern and Midwestern Medical Group. The first issue focuses on the structure of Midwestern. The company has a very horizontal hierarchy. This can be useful in companies if the vision and mission also match the horizontal structure. The scenario Midwestern is very different. The company installed a program called MBS. This system was aimed at creating independent unit which were autonomous. The rigid structure however does not support such a system. The second issue revolves around the vision of establishing Midwestern Medical Group. At initiation the group was not given a clear goal and agenda. The Midwestern group formulated MMG with the vision of creating a stronger market presence. However the group was not treated as an expense and was expected to generate a profit. Therefore we can say that there was a lack of agreement on the nature and role of MMG. The effect of MMG on the company as a whole is not agreed upon. This is because the MMG management still considers itself as a separate group with its own agenda and targets. This in fact is not due to any faults of management but lack of consistency in the MBS model and organizational structure. Directional Strategies Situational Analysis The situation analysis or the 5C analysis will aim to establish the position of the group and MMG. Company Product line The MMG product line is the smaller clinics. The fact of the matter as has been shown by various studies is that this is not a profitable business in itself. As has been shown in the case that even despite its losses MMG was doing much better than was expected or forecasted for it. The company however wants to expand its product line. This expansion creates a threat for the profitable branch of the Midwestern group which is the hospital division. Therefore the MMG is limited to its clinic division and cannot extend its product line. Image in the market Although the MMG does not create any profit but its recommends an estimated 300 million annual business to the hospital branch. Therefore it can be said that the Midwestern group has established a very positive image in the market because of the MMG. If MMG was sold off to another company, they would ultimately make use of this market image. Otherwise the company does not have to worry about create marketing awareness. Culture The rigid culture is established at the center of the Midwestern group. One of the major reasons of this rigid culture is the dominance of the hospitals. This dominance is expected as they generate the bulk of profits for the group. However they ability of profit generation is only possible because of support from other less appreciated parts of the company. This lack of appreciation has created a culture of resentment and negative competition. Collaborators Suppliers The MMG acts as a major supplier of customers to the hospital division. The relationship of this collaboration is however not quantified. Therefore the hospital branch refuses to acknowledge the effect of this MMG. Alliances The new management under Olsen aims to create an alliance with other hospital groups in the region. This alliance can be a negative factor for the Midwestern group if not managed effectively. This is because the clinics can be easily plucked away, as has been shown in the past. Once alliances have been formed it would become much easier for the clinics to simply move away from the Midwestern group and MMG. Customers The availability of customer is not major issues for Midwestern in the current structure. However if the structure is change i.e. MMG is divested or sold off then there would be a decreased flow of customers to other parts of the organization. The retail channel formulation is relevant to this discussion. The current structure of Midwestern groups forms a retail chain like system. Therefore even if the customer ends up buying the product from Midwestern hospital, the entire chain is responsible for creating the brand that is Midwestern. Therefore it can be said that if the MMG is no longer present the market size for Midwestern would shrink. Competitors Actual or potential The actual competitors are the other clinics and hospitals in the region. The integrated network of Midwestern however gives it an advantage over competitors. However if the chain is broken than new competitors would start eating into Midwestern market. Therefore the company will have to understand that the key strength lies in the integration of its different units. This is the main reasons that previous managements have not liquidated MMG. Weaknesses and Strength The main weakness of Midwestern competitors is the lack of integration. The smaller units can not pose a threat until they make an integrated network. The smaller practices however can target different business segments. The clinics that have broken off from MMG can also be a serious concern for the business. This is because they have broken off on bad terms therefore it can be expected that referral would be made to alternate facilities. Climate The environment in this era is perfect for growth. The booming economies and increased emphasis on health care is increasing the growth of this industry. There is competition for larger operations from countries such as Brazil and India. The sky rocketing rates in the surgical operations are forcing many consumers to fly to cheaper countries for treatment. Their rates are many times lower to rates being offered by American hospital. There are no present threats however from the regulatory or political environment to the business. Strategy Formulation The strategy of MBS has failed for MMG and the hospital division. According to the former Chief of MMG the system has become even worse for MMG after the implementation of MBS. The MBS is a very good initiative in itself. However MBS is making promises to the different departments of Midwestern group which are not realistic. The company promises to gives autonomy to its units. This promise however cannot be realized because the hospital division still dominates the management. The company should first have considered remodeling its own vertical structure. In the modern complex and highly competitive environment this structure would create even more problems, MMG is only the start. If MMG is not given the required autonomy, it should not be considered a separate group. On the contrary the three phase proposal of Olsen is more relevant. The hospitals should take the responsibility of the clinic instead of a separate group. The hospitals want the best of both sides. They not want to get rid of MMG as it would cost them millions of dollars in referrals neither they want to sustain the financial losses to operate clinics. Implementation The management must work on sustaining a long term vision for MMG. This would also mean that the group must be given a long term management. The following are key initiatives for implementation phase to be successful: Get MMG representation on the board Empower change leadership The clinics should be affiliated to Midwestern rather than MMG The MBS program should be immediately removed from Clinics and hospital branch The clinics should be given security in the change process and should be involved in it from the very beginning Recommendations The only solution is to put divide MMG and put it up for adoption by the clinics. The division is a very useful addition to the Midwestern but the company is not ready to accept its role. Therefore Midwestern will only create more problems than it would solve. The steps taken by Olsen to make Midwestern break even would only cost more business by the hospitals. Therefore the group as a whole would not gain anything other than internal conflict. The company should therefore divide MMG according to referrals by hospitals. This would shift the responsibility to the hospitals and would remove any conflicts that existed inside the company. Benchmarks The company should however ensure that the individual clinics do not break way. This would be the best judge of the transition process. Moreover the entire performance of Midwestern should be analyzed rather than individual performance. The real integration lies in creating profits for the entire organizations. The MBS program was only creating benchmarks and motivation for individual performance rather than company performance. Read More