CHAPTER 1: THE NATURE OF STRATEGIC

MANAGEMENT
Prepared by: Dorisa Capile-Ines, RTRP
Learning Objectives
After completing this chapter the student should be able to:
1. Explain why strategic management has become crucial in today’s dynamic
healthcare environment.
2. Trace the evolution of strategic management and discuss its conceptual
foundations.
3. Describe and explain the concept of strategic thinking maps.
4. Define and differentiate between strategic management, strategic thinking,
strategic planning, and managing the strategic momentum.
5. Understand the benefits of strategic management for health care organizations.
What is Strategic Management?
• is the process that involves managers from all parts
of the organization in the formulation and
implementation of strategic goals and strategies.

• is fundamental in leading organizations in dynamic

environment which provides the momentum for
change and organizational change is a fundamental
part of survival.
Why Strategic Management has become crucial in today’s HC
environment?

Due to:
The dramatic changes in the health care industry
(1980s) and the implementation of Medicare’s
prospective payment system (1983)
Significant change comes from many sources
including:
federal, state, and local health care legislative
 Hospitals and healthcare organizations are
today operating in an extremely competitive
environment, with increasing pressure to
improve quality and reduce costs. In
responding to the dynamic situation,
transformation of organization requires the
will to organize delivery around the needs of
Given the challenges faced by managers due to the
high level of uncertainty and risks from the
environment plus the complex nature of hospitals, it is
necessary to seek a strategic management approach
with refined sensitivity. This is to reduce tensions and
conflicts finding better ways to integrate efforts and
help improve the health services seeking legitimacy in
the eyes of stakeholders and long-term institutional
EVOLUTION OF STRATEGIC MANAGEMENT AND
ITS CONCEPTUAL FOUNDATIONS

• Long Range Planning (1950’s-60’s) - Period of high

growth required managers to project demand and
plan for facilities growth and assumed reasonably
static conditions
• Strategic Planning (60’s through 80’s) - Evolved to
recognize the dynamic nature of marketplaces,
driven by rapid changes in technology, consumer
values, competition and increased funding (Medicare)
and remained very building/facility/program focused.
STRATEGIC THINKING MAP
Concept of the
Map
Strategic Thinking
• An intellectual process that asks people to “see the big
picture”
• Strategic thinkers reinvent the future
• Acknowledges the reality of change
• Questions current assumptions and activities
• Builds on an understanding of systems
• Envisions possible futures
• Generates new ideas
Strategic Thinking

“Strategic thinkers draw upon the past, understand

the present, and envision an even better future.
Strategic thinking requires a mindset a way of
thinking or intellectual process that accepts change,
analyzes the causes and outcomes of change, and
attempts to direct an organization’s future to
capitalize on the changes.”
 Strategic Planning
• Provides a sequential, step-by-step process for creating strategy
• Involves periodic group strategic thinking (brainstorming sessions)
• Requires data/information but incorporates consensus and
judgment
• Facilitates consistent decision making
• Reaches consensus on what is required to fit the organization with
the external environment
• Results in a documented strategic plan
 Strategic Planning

The interaction and results of external environmental

analysis, internal environmental analysis and the
development or refinement of the organization’s
directional strategies, form and drive the basis for the
development of strategy.
Managing Strategic Momentum
• Actual work to accomplish the objectives
• Includes mechanisms to track and evaluate performance
• Is a learning process and encourages innovation
• Ties the organization together with a common purpose
(vision)
• Helps managers think about the present and the future
• Improves overall coordination
• Initiates new strategic thinking and sets clear priorities
49

Managing Strategic Momentum

- Attempts to continually orchestrate a fit between the

organization’s external environment (political, regulatory,
economic, technological, social, and competitive forces) and its
internal situation (culture, organization structure, resources,
products and services, and so on).
- Is required to provide an ongoing philosophy of strategic
management that aligns service delivery and
support activities to the strategic plan, evaluates against the
Benefits of Strategic Management
• ties the organization together with a common sense of purpose and shared values;
• improves financial performance in many cases;
• provides the organization with a clear self-concept, specific goals, and guidance as
well as consistency in decision making;
• helps managers understand the present, think about the future, and recognize the
signals that suggest change;
• requires managers to communicate both vertically and horizontally;
• improves overall coordination within the organization; and
• encourages innovation and change within the organization to meet the needs of
dynamic situations
What Strategic Management is not?
• should not be regarded as a technique that will provide a “quick fix” for an
organization that has fundamental problems.
• is not just strategic planning or a yearly retreat
• not a process of completing paperwork
• it is not based solely on a forecast of present trends.
MUST:
1. be adopted as a philosophy of leading and managing the organization
2. effective strategic management requires little paperwork. It is an attitude, not a
series of documents
3. attempts to identify the issues that will be important in the future.
 The Levels of Strategic Management

Strategic management may be applied at various

levels within the organization. Thus, strategic
management often involves developing strategies at
the functional unit level to achieve strategies at the
organization level. Organization strategies help
achieve divisional strategies. Divisional strategies, in
turn, are the means to achieving corporate ends. At
CHAPTER 2:
Understanding and Analyzing the General Environment and the
Health Care Environment
Learning Objectives
After completing this chapter the student should be able to:
1. Appreciate the significance of the external environment’s impact on health care
organizations.
2. Understand and discuss the specific goals of environmental analysis.
3. Point out some limitations of environmental analysis.
4. Describe the various types of organizations in the general and health care environments
and how they create issues that are of importance to other organizations.
5. Identify major general and industry environmental trends affecting health care
organizations.
6. Identify key sources of environmental information.
7. Discuss important techniques used in analyzing the general and health care environments.
8. Conduct an analysis of the general and industry external environments for a health care
organization.
The Importance of
Environmental
Influences
The Goals of Environmental Analysis
1. to classify and order issues and changes generated by
outside organizations;
2. to identify and analyze current important issues and
changes that will affect the organization;
3. to detect and analyze the weak signals of emerging issues
and changes that will affect the organization;
4. to speculate on the likely future issues and changes that
will have significant impact on the organization;
5. to provide organized information for the development of the
organization’s internal analysis, mission, vision, values, goals, and strategy
6. to foster strategic thinking throughout the organization.
Limitations of Environmental Analysis

Sometimes
Environmental pertinent and
analysis cannot Managers cannot timely information
see everything. is difficult or
foretell the future. impossible to
obtain.
Sometimes there is
There may be Managers’ strongly
a general inability
delays between the held beliefs
on the part of the
occurrence of sometimes inhibit
organization to
external events and them from
respond quickly
management’s detecting issues or
enough to take
ability to interpret interpreting them
advantage of the
them. rationally.
issue detected.
Strategic Thinking Map of the Environmental Analysis
Process

1. Scanning

2. Monitoring

3. Forecasting

4. Assessment
 Strategic Thinking Map of the Environmental Analysis
Process

SCANNING
• View external environmental information
• Organize information into desired categories
• Identify issues within each category
 Strategic Thinking Map of the Environmental Analysis
Process

MONITORING
• Specify the sources of data (organizations, individuals,
or publications)
• Add to the environmental database
• Confirm or disprove issues (trends, developments,
dilemmas, and possibility of events)
• Determine the rate of change within issues
 Strategic Thinking Map of the Environmental Analysis
Process

FORECASTING
• Extend the trends, developments, dilemmas, or
occurrence of an event
• Identify the interrelationships between issues
and between environmental categories
• Develop alternative projections
 Strategic Thinking Map of the Environmental Analysis
Process

ASSESSMENT
• Evaluate the significance of the extended
(forecasted) issues to the organization
• Identify the forces that must be considered in
the formulation of the vision, mission, internal
analysis, and strategic plan
Environmental Tools and Techniques

1. TECHNIQUE: Simple Trend Identification and Extrapolation

PRIMARY FOCUS: Scanning, Monitoring, Forecasting,
Assessing
ADVANTAGE: Simple, Logical, Easy to communicate
DISADVANTAGE:

• Need a good deal of data in order to extend trend

• Limited to existing trends
• May not foster creative thinking
Environmental Tools and Techniques

2. TECHNIQUE: Delphi Method

PRIMARY FOCUS: Scanning, Monitoring, Forecasting, Assessing
ADVANTAGE: Use
of field experts, Avoids intimidation problems,
Eliminates management’s biases
DISADVANTAGE:

• Members are physically dispersed

• No direct interaction of participants
• May take a long time to complete
Environmental Tools and Techniques

3. TECHNIQUE: Nominal Group Technique

PRIMARY FOCUS: Scanning, Monitoring, Forecasting,
Assessing
ADVANTAGE: Everyone has equal status and power, Wide
participation, Ensures representation,
Eliminates management’s biases
DISADVANTAGE:

• Structure may limit creativity

• Time consuming
Environmental Tools and Techniques

4. TECHNIQUE: Brainstorming
PRIMARY FOCUS: Forecasting, Assessing
ADVANTAGE: Fosterscreativity, Develops many ideas and
alternatives, Encourages communication
DISADVANTAGE:

• No process for making decisions

• Sometimes gets off track
Environmental Tools and Techniques

5. TECHNIQUE: Focus Group

PRIMARY FOCUS: Forecasting, Assessing
ADVANTAGE: Uses experts, Management/expert interaction,
New viewpoints
DISADVANTAGE:

• No specific structure for reaching conclusions

• Finding experts
Environmental Tools and Techniques

6. TECHNIQUE: Dialectic Inquiry

PRIMARY FOCUS: Forecasting, Assessing
ADVANTAGE: Surfaces many subissues and factors, Conclusions are
reached on issues,
Based on analysis
DISADVANTAGE:

• Does not provide a set of procedures for deciding what is

important
• Considers only a single issue at a time
• Time consuming
Environmental Tools and Techniques

7. TECHNIQUE: Stakeholder Analysis

PRIMARY FOCUS: Scanning, Monitoring
ADVANTAGE:Considers major independent groups and individuals ,
Ensures major needs and wants of outside organizations
are taken into account
DISADVANTAGE:

• Emerging issues generated by other organizations may not be

considered
• Does not consider the broader issues of the general
environment
Environmental Tools and Techniques

8. TECHNIQUE: Scenario Writing

PRIMARY FOCUS: Forecasting, Assessing
ADVANTAGE: Portrays alternative futures, Considers interrelated
external variables, Gives a complete picture of the future
DISADVANTAGE:

• Requires generous assumptions

• Always a question as to what to include
• Difficult to write
Strategic Thinking Questions for Validation of
the Strategic Assumptions
1. Has the organization’s performance been adversely
affected by unexpected or new trends or issues in the
general environment?
2. Has the organization’s performance been adversely
affected by unexpected or new trends or issues in the
health
3. Havecare
newenvironment?
opportunities emerged as a result of new
trends, issues or events in the external environment?
4. Is the strategy acceptable to the major stakeholders?

5. Are there new technological developments that will

affect the organization?
6. Have there been social or demographic changes that
affect the market or strategy? Changes in ethnic mix?
Language barriers? Family structure?
The Strategic Management Process
REFERENCES
• Health Care Strategic Management of Health Care Organizations, Seventh Edition by
Peter M. Ginter, W. Jack Duncan, Linda E. Swayne; Chapter 1 -2 Jossey-Bass 2013
• Strategic Management, Neil Ritzson, 2011
• Essentials of Strategic Management, Charles W. L. Hill, Gareth R. Jones, 3 rd Edition
• Strategic management of a healthcare organization: engagement, behavioural indicators,
and clinical performance,
Giuseppe Speziale*, European Heart Journal Supplements (2015) 17 (Supplement A), A3–
A7
• Strategic Management in Hospitals: Tensions between the Managerial and Institutional
Lens, Lucilaine Maria Pascuci, Victor Meyer Júnior, João Marcelo Crubellate, 2017