Analysis of the industry forces and the strategic choices adopted by private hospitals in nairobi

Abstract

This report presents the findings of a survey of the industry forces and the strategic choices adopted by private hospitals based in Nairobi, Kenya. The research was conducted among the 5 I private hospitals based ill Nairobi. The study examined the industry structure. 56.4'Yu or the hospitals were round to he recent entrants under 10 years of age. In terms of size, 66.6 % were found to be small hospitals with less than 5U beds. The majority (5':.>.4'%) of hospitals were found 10 be owned by individuals and private companies in equal proportions. The industry is almost equally split between non profit and profit seeking hospitals, with a slight majority or 55.3% being profit seekers. The industry mainly comprises or indigenous firms. An overwhelming majority (i)(l.4':I,,) were found in he locally owned or controlled The study revealed that the level of competition in the hospital industry is quite high. 68.4% or the respondents rated the level of competition as high to very high while only an insignificant 5.2% rated it as low or very low. Further, the study examined the impact or the industry forces. The forces were all found to be significant. On a scale of 1-5 each of the forces scored above average. The Coree with the greatest impact on the hospitals is rivalry/competition from existing hospitals with a score of 3.62. This was followed by the following forces in descending order; bargaining power of customers (3.5(»), bargaining power 01' suppliers (3.08), threat or new entrants/upcoming hospitals (3.CH) substitutes (3.05). With the lowest score of 2.95, government was found to have the least

influence in the industry. Given that this should be a highly regulated industry, and the significant influence of government in other markets, this low score was quite unexpected. The findings revealed that several strategic choices are adopted by private hospitals. While the popularity of each choice differs, none is completely dominant. The most popular is cost leadership with a 56.4% score. This is followed in order of popularity by new product development (43.6%), market penetration (28.2(%), market development (28.2(X.) and focus (18.4%). Tile least popular is diversification with <l 7.7% score. Tile strategic choices to those adopted by hospitals in the North American market which has the most developed private sector owned hospital industry. This study raises several questions for further research. Among them is the industry forces and strategic choices selected by hospitals in other parts of the country. The study does not establish a causal relationship between industry forces, hospital characteristics and strategic choice. Such studies would deepen understanding of strategic issues in this poorly researched industry