Futures That Work

We all want to live long, healthy, independent and meaningful lives. This is a goal not only for us as individuals, but also for our family and communities. It is the responsibility of all funders, planners and health providers to contribute to this goal. No one person can do everything, but everyone can do something.

1. What is competition like in the industry you have chosen?

The industry I have chosen is Health and Social Services provision in a Non-Government Organisation delivered in a community setting. As a Human Services organisation this presents some limitations and difficulties when applying a five force analysis. This is due mainly to the non-production line process of Human Services. Unlike a production line Human Services are not a set of sequential operations where materials are put through a refining process to produce an end-product for onward consumption; or components are assembled to make a finished article (Jones and May, 1992).

For our industry and specifically in Health and Social Services we receive funding to deliver a service that helps people form changes of behaviour, thought and/or feelings. These services are delivered by people to people. The consumers/clients generally do not purchase these services as they are heavily funded by the Government and are low cost or free. To try and gain some utility from this analysis I will divide the organisation into three parts. This will make it easier to compare with competitors as very few organisations in the country provide the same breadth of services but there are competitors for each of the three divisions locally. These divisions are:

1) Health and Social Service division (HS): Provides health services to individuals in the community i.e. Mental Health, Addiction, Outreach Immunisation, Social Work Family Violence, Well-Child Health Checks

2) Public Health Services division (PH): Provide population based public health i.e Health Nutrition, Smoking Cessation Promotion, Destigmatisation and antidiscrimination of people with Mental Illness.

3) General Practice Service division (GP): Provides General Practice (Doctor) services to individual from a community setting.

What is the competition like?

Five forces analysis

1. Rivalry of Existing Competitors: There is strong rivalry for the GP division as their level of funding is directly related to the number of enrolled clients. Other features that illustrate strong rivalry are the zero cost of switching services, a number of GP clinics that have been acquired by one group of GPs thus increasing their market power due to increased locations and enrolled population and lowering of administrative and overhead costs.

Though there is not a direct correlation of enrolled clients to funding allocation for the PH and HS services ongoing contract funding per annum is reliant on performance which is measured in outputs which is the number of clients using services. There is a lag effect here of up to a year to adjust the funding levels to enrolled clients and requires contract negotiation rather than fee for service. However for the PS and HS service client referrals are managed by a third "objective" party to ensure eligibility and may illustrate weak rivalry. However there are always attempts at influencing referrals or funding levels such as developing close relationships with referrers, funders, community groups and politicians.

The other factor that illustrates strong rivalry is the moves by the few organisations which provide PS and HS to expand their services and bid for upcoming or renewing contracts. An example of this is one of the three Mental Health residential providers bidding to expand their Adult residential facility and undercutting their existing competitor or bidding for Alcohol and other Drug residential services. As the pool of funds has always been fairly constant this is the only way organisations can increase their funds. This has increased with the shrinking pool of funds for Health services due to the financial crisis.

2. Bargaining Power of Suppliers: The three services are delivered through the staff rather than producing products. Thus the suppliers are the Human resources such as Social Workers, Doctors, Nurses, Community Support Workers and clinicians and they supply the end product which is their service. There are some equipment and supplies suppliers but by in large these are supplies are easy to obtain and there are a number of suppliers. However the number of capable and competent staff for our business is small so the bargaining power of suppliers is weak to moderate depending on which position. For a GP there is a huge shortage so the bargaining power is moderate but for a community support worker the power is weak as there is a higher number of potential staff. As the supplier is crucial to the service is difficult to replace and is limited in supply they hold a strong bargaining power but only as individuals. It is when they coordinate that there is strong bargaining power hence the strength of the union collectives.

3. New Entrants to the Market: There is a weak threat by new entrants. The access pathways for the HS and GP services are controlled and the providers of these services are regulated making it difficult for potential new entrants to the market. There is high start up costs which not only includes equipment and professional staff but also the regulatory requirements and compliance costs which certifies you to practice as well as the funding contracts. You cannot just start delivering health services out of a car boot nor can you import services like commodities and sell them without a license.

4. Substitute Products or Services: There is a weak threat for the GP and HS as these services do not have readily accepted substitute services. The only substitutes would be non-regulated services such as Homeopaths and traditional healers for the GP service or the free health services that the Public Hospital provides in the Emergency Department. The Emergency Department however is a lengthy wait as it is a process of highest priority first served. The access pathways for the HS services are also controlled by a third party and the providers of the HS, PH and GP services are regulated making it difficult for new entrants to the market.

5. Bargaining Power of Buyers: is weak because there are many individual buyers (clients) for all services. They also do not tend to organise and continue to purchase services as individuals.

Nominate which of the five competitive forces is strongest and which is weakest.

The strongest competitive force is from existing competitors because they have already met regulatory and compliance requirements

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