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Need to outline the current position of healthcare industry and suggest strategies/recommendations to improve Australia’s position

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Current Position of Australia’s Healthcare Industry

Current Position of Australia’s Healthcare Industry

Current Position of Australia’s Healthcare Industry

Executive Summary

Globalization in business sectors has given researchers and scholars a new area of research, to focus on that is the analysis of various industries and how they can effectively compete at the global arena. Therefore, this report draws upon Porters theory of national competitive advantage to analyze the current position of Australia’s Health Care Industry and suggests strategies or recommendations to improve its position. In putting this discussion into context, this report will first provide background of Australia’s healthcare industry including system and financing overview. The report will also analyze the current position of Australia’s Health Care Industry using four dimensions of Porter’s National Diamond comprising of factor conditions, company structure, strategy and rivalry, demand conditions, and supporting and related industries. In factors conditions, the report will discuss issues such as human resource, physical structure and financial resource of Australian healthcare industry. The report found out that Australian healthcare industry has few doctors and nurses. However, the government spends a lot of funds on healthcare hence the country has of the best physical structure in form of hospitals. In Industry Structure, Strategy and Rivalry, the report discussed local condition of the industry which affects Australian healthcare operation. In this perspective, the report discussed local rivalry, organizational structure and national culture. Australian’s healthcare industry is decentralized. Demand conditions looked at home conditions which drives that countries’ competition. The report established that demand for doctors, advanced healthcare facilities and innovation shape up competition in Australia. The report also gives various recommendations which can be used to rectify some of the challenges the industry face today. The report has recommended for employment of foreign trained healthcare practitioners, training of more doctors, reduction of time spend in hospitals, creating of more clear structure, improving technology and managing cultural differences within hospitals. However, generally, the report found out the Australia enjoys high status of healthcare due to high budgets. As a result, the industry is very competitive on an international stage.

Table of Contents

2Current Position of Australia’s Healthcare Industry

2Executive Summary

51.0 Introduction

62.0 Australia’s Health Care Current Position

62.1 Porters’ Theory of National Competitive Advantage

62.1.1 Factor conditions

92.1.2 Industry Structure, Strategy and Rivalry

122.1.3 Demand conditions

123.0 Recommendations

123.1 Using foreign trained healthcare practitioners

133.2 Train More Doctors

143.3 Improving hospital admission by reducing stay time in hospital or expanding hospitals

143.4 Creating a clear structure

153.5 Managing cultural differences

153.6 Approving Technology

174.0 Conclusion

175.0 References

1.0 Introduction

Intensification of globalization in the 21st century has opened international borders and exposed countries’ comparative advantages (Breslin 2004, p.657). The result has depicted countries which are well off in terms of products and services than others. It is a manifestation that companies no longer compete only on production of products but also services. Horowitz, Rosensweig and Jones (2007) claimed that healthcare is one service sector, which forms a platform for competition as countries with proper healthcare acts as a point of reference and also attract patients from other parts of the world. The growth of Australian healthcare industry over the years has attracted a lot of praise across the globe as more countries use it as a reference point to developing their own healthcare sector. Mary and Parker (2011, p.57) opined that despite the praise, Australian healthcare sector also has its shortcomings which ought to be enhanced to sustain change and increased efficiency and effectiveness. Therefore, this paper will outline the current position of the Health Care industry and suggest strategies or recommendations to improve Australia’s position. The report will draw upon Porters theory of national competitive advantage to analyze Australia’s Health Care industry in order to observe if it can attract international firms into the market.
Australia is one of the developed countries which enjoys effective healthcare. Among the OECD countries, Australia ranks as one of the best due to the fact that federal government spends highly on healthcare (Ono, Lafortune & Schoenstein 2013). Healthcare spending has been increasing over the years as the government understands that proper healthcare is the labour market. Deloitte (2015) stated that in Australia, healthcare system is primarily divided into two to include private and public sectors. Public health is decentralized where federal government set national policies while state government implements these policies and those within their jurisdiction. Despite having some of the best facilities and innovation, Australia’s healthcare industry faces challenges of shortage of doctors and nurses, complex structure and cultural diversities which affects its operations. For instance, Australia healthcare industry had 3.1 doctors and 10.1 nurses per a thousand populations respectively (OECD 2013). Until these issues are looked into, the country will still find it hard to provide adequate healthcare to its people and to compete with countries like the US, the UK, Greece and Norway.

2.0 Australia’s Health Care Current Position

2.1 Porters’ Theory of National Competitive Advantage

Institutional or industry analysis is continuously becoming an important factor as international trade new intensifies and globalization open national borders (Hill 2009, p.72). International trade has increased trade among countries in terms of product offering and service delivery (Fendel & Frenkel 2005, p.30). In that way, international competitiveness has turned out to be a topic for the mainstream study in both practical areas and academic fields. Ketels (2006, p.65) claimed that over the years, strategists have used Porter’s diamond theory or model on to analyze industry (or national) competitiveness using four dimensions of this model comprising of factor conditions, company structure, strategy and rivalry, demand conditions, and supporting and related industries.

2.1.1 Factor conditions

Factors conditions such as human resource, physical structure and financial resource are very important to Australia healthcare competitiveness. Human resource is very important factor in competition, be it companies and countries. In most cases, human resource has been discussed on the basis of companies as there is more competition among companies in global markets. Human resource is considered as the individual who compose the workforce.

Fillingham, Edwards & Peck (2004, p.23) posited that countries which do well in terms of healthcare are considered to have a good number of human resources in the form of doctors, nurses and other healthcare practitioners. For instance, the research has found out that Australia healthcare industry had 3.1 doctors per a thousand population, which was an average number within OECD countries in 2010 (OECD 2015). On the other hand, the sector had 10.1 nurses in a 1000 population in 2010; a figure which is slightly higher than 8.7 which was the average number at OECD.

A research into OECD has shown that the number of doctors has significantly grown from 2000 to 2011 on the basis of per capita and absolute number (OECD 2013). The rate of growth was mainly fast in nations which began with the lower level particularly in 2000. Australia, Mexico, Turkey and Korea were among them. Australia has seen the number of doctors grow because of the growth of the number of graduates from local medical institutions every year. OECD (2013) claimed that the rise of graduate in medical school graduates in Australia is estimated to be 2.5 times better from 1990 to 2010 and shows a government commitment to increase training capacity and stop depending on foreign-trained doctors, nurses and general healthcare practitioners.

Physical resources mean the buildings like schools which impacts knowledge and building which provide services like hospitals (Nisipeanu 2013, p.445). In terms of physical resources, several studies have established that Australia has up to 19 medical schools which offer courses in a wide range of medical fields including dentistry, nursing, Cardiology, pediatrics, Psychiatry, Oncology, Ophthalmology and Dermatology among others (Mary & Parker 2011, p.54). While not having many medical schools like the US which over 141, Australia is better than Belgium, Czech Republic, Denmark, Russian, Finland, Iceland and Netherland which have fewer. The means that Australia currently stands a high chance of training more doctors and nurses compared to these countries. Nevertheless, the cases where Greece has more doctors compared to Australia can be explained in term of population.

World Health Organization (2011) stated that currently, Australia’s population is twice that of Greece hence more people patient to attend to. However, Australia cannot compete with some of its peer countries like the US, Turkey, Germany, France and Spain due to more physical resource in terms of medical schools. OECD (2015) argued that in terms of bed capacity, Australia has tried as the current statistic states that number stand at 3.2 within 1000 population. In comparison to other OECD countries, this number is average. Australia is even better than countries like India, the US, UK and Turkey as it can accommodate more patients.

Industries also compete in terms of capital resource. This form of resource major entails the cost used to finance the industry. With healthcare needs increasing in Australia in the recent years to population growth, the government has been forced to increase healthcare spending (AIHW 2012). In 1990, healthcare expenditure for Australia’s healthcare industry was $50.3 billion and currently the healthcare spending stand at $178 billion (OECD 2015). This is slightly above average within the OECD. The spending is slightly lower compared to that of the US, Norway, Netherlands, Denmark, Germany, and Switzerland in term of per capita. These countries also have a better healthcare than Australia. McCoy, Chand and Sridhar (2009, p.411) argued that a country which highly spends on healthcare provides the best healthcare and could attract more patients from other countries for treatment. Based on this argument, Australia may attract patients from countries such as Ireland, the UK, Finland, Iceland and its neighbor New Zealand due to the fact it spends more funds on healthcare than these counties (OECD 2013).

2.1.2 Industry Structure, Strategy and Rivalry

This dimension argues that the local condition of the industry affects its operation in the global arena. The local conditions could be rivalry which shapes up competition (Fang 2014, p.479). Australia’s health structure is a bit complex because it involves both federal and state governments providing healthcare to citizens. AIHW (2012) posited that the arrangement between the federal government and state government can possibly be regarded just as a ‘web’ since it is involves hospitals, doctors, patients and policy makers. It is very difficult to understand the background process which healthcare system go through unless a keen emphasis is put. AIHW (2012) claimed that there is a relationship between the federal and state government which creates mechanism for policies and practices, coordination, funding and regulation. Behan (2007, p.94) asserted that while federal government major role is to create healthcare policies for both public hospitals, its other role entails paying healthcare practitioners. On the other hand, state government programs have the role of ensuring operation.

Australia’s healthcare system seems to operate the matrix structure to run its operation because the industry is large and needs a great co-ordination. Jacobides (2007, p.457) opined that the matrix structure is multifaceted due to the fact that industry is often organized around numerous dimensions like the services and geographical location and workforce report multiple supervisors. However, it should be noted that national culture also forms part of strategy in creating organizational culture. For instance, Australia has a matrix system which has several managers in between which the supervisor monitor progress within the structure. The structure has been created that way due to the fact that Australia is a county which embrace low power distance. According to Hosftede dimension of culture, Australia score lowly (36) in terms of power distance and it means that Australian staff normally will want to be close to power (Hofstede 2007, p.414). This arrangement can discourage new health institution which wants to invest in Australia’s healthcare industry. This is because they have cultural difference which could affect their operations.

The research by Wright (2011, p.86) found out that the Australian health system was borrowed from the UK model which is both funded by the state and privately. Wright (2011, p.89) also claimed that in both the UK and Australia healthcare industry are funded by the private companies while up to 75 percent of hospital beds are funded by the government. The similarity between Australia and Britain makes the Australia’s healthcare industry more attractive to private hospitals from Britain. The argument is that when structure is similar, it makes it easy for companies to expand and implement the system. Australia’s healthcare structure and that of the UK are both decentralized. According to Regmi et al., (2010, p.363), decentralization is described as the socio-political policy which relocates authority, power, control and responsibility in the planning, decision-making and management from the central government to the local government. The decentralization is these countries are done on the basis that some roles remain with the federal government while some are devolved to state government.

Costa-Font and Greer (2012, p.44) urged that countries which have embraced decentralization such as Australia and the UK enjoy some competitive advantage because it ensures the funds are efficiently managed. This is because it is only people at the lower level that understand the prevalence of disease and equipments needed to treat these diseases, so they can determine the budget to cover all costs (Boyle 2011, p.475). The decentralization reforms have significantly improved healthcare in Australia. Some similarities have also been found between the Australia’s healthcare industry structure and strategy and that of Canada. The few similarities reduce the challenges Canadian healthcare companies can face in Australia. Since situation of similarities in structures and other issues like shortages are encouraging foreign companies to expand their services to Australia, competition in Australia’s health industry has increased considerably. The situation has prompted private health companies to review their strategies. Some of the strategies used by Australia’s private hospitals have been to lower cost through collaborating with insurance companies (Britnell 2015, p. 56).

Structure of an industry is also affected by political and social factors of a country. For instance, the government of the day appoints minister who is expected to implement policy the prime minister set in his or her campaign manifesto. Smith and Forgione (2007, p.24) claimed that like in many other countries’ healthcare model and general system is often political in concept and has been polarized many times in Australia. In other words, healthcare system and policy is shaped by politics. Such politics can highly affect new companies as new government normally has their policy about health which can change the existing systems of operation.

In terms of strategy, Australia’s healthcare industry has significantly adopted the use of technology in diagnosis, treatment, information strategy and general management. Research about adoption of technology in the healthcare sector within OECD reveals that Australia comes third after the US and Japan. Statistics about usage of CT scanners and MRI showed that Japan ranks first in terms of numbers followed by the US then Australia comes third. Most Australian healthcare institution has also adopted use of website to disseminate information to consumers. However, adoption of electronic healthcare has been slow among Australian hospitals. Furthermore, some hospitals do not have even informational technology to upgrade databases, website and management software.

2.1.3 Demand conditions

In his analysis, Porter (1990, p.2) defined demand conditions as home conditions which drives that countries’ competition and drives its growth, quality improvement of innovation. The theorist also claimed that when there are more demands locally, companies concentrate on producing a superior product or service, hence creating national advantage (Porter 1990, p.34). On the perspective of Australia’s healthcare, this research had earlier found that Australia has high demand for doctors and nurses since they are few in number in relation patients’ ratio. AIHW (2012) stated that despite the need for more healthcare practitioners, Australia hospitals are more equipped and provide better healthcare compared to some of the OECD counterparts. The country also has some of the best trained doctors in the world and competes with the US, the UK and France in terms of expertise (AIHW 2012). However, Australia is disadvantaged in specialized healthcare demands. The country needs specialized doctors in asthma and mental health as Australian leads in these disorders. To transfer such its competitiveness into foreign countries, Australian will first need to reduce shortages of doctors and meet the demand for healthcare. However, Abdallah (2014, P.168) contended that through model like Medicare and Medibank insurance, Australia’s healthcare industry has made healthcare cheaper and more accessible. These policies and practices can be transferred by companies to give them a competitive advantage even in foreign markets.

3.0 Recommendations

3.1 Using foreign trained healthcare practitioners

Australia faces a big challenge in terms of human resource in hospitals and other healthcare facilities, even as it attempts to improve the ratio of doctor to patients. Smith and Forgione (2007, p.20) said that most of the doctors are majorly at the age of 55 years and it means in the next few years many will retire leaving the industry with massive need for human resource. Training a doctor takes five years and it means that the current shortages could take years to be solved. It simply means Australia cannot send their doctors to other countries to top up for shortages. The shortage also means there is high demand for more doctors in Australia hence other international private hospitals have the opportunity to invest in Australia and compete with local ones (Smith & Forgione 2007, p.23). The research has indicated that population of doctors varies significantly in OECD countries in terms of per capita. Since 2011, Greece has registered the highest number with 6.1 doctors per a thousand population. Greece is closely followed by Russian and Austrian healthcare industries. It means Australia can import doctors from Greece, Russia and Austria to fill for the shortages that exist. Despite the situation, the solution lies in inviting foreign Australian trained doctors to help reduce the shortage and improve doctor- patient ratio.

3.2 Train More Doctors

According to Ono, Lafortune & Schoenstein (2013) foretelling demand and supply for doctors in Australia has been hard due to uncertainty regarding the retirement patterns, working hours, aging population needs and health expenditure. Nevertheless, some researches claim that Australia is expected to have a shortage of doctors and nurses by 2025 based on the baseline results (OECD 2013). The situation means that government must do two things. One is to invest in new and old medical schools to train more doctors to reduce the shortage that currently exists. Old medical schools can be expanded to increase number of enrolment for medical students. Two, the government can import foreign doctors from countries with surplus to meet the required needs. However, the second reason is not always sustainable as these doctors will actually go back to their countries. McCoy, Chand and Sridhar (2009, p.408) argued that hiring foreign doctors needs more funds to sustain because every time foreign doctors quit, the government will require recruiting new ones. Similarly, Australia will not compete with other countries with established healthcare industry if they import doctors from other countries (Mary & Parker 2011, p.54). The argument is based on the Mercantilism’s suggestion that it is in the best interest a country to trade in more exports rather than imports. The state where Australia sends more doctors to other countries to provide for treatment if the government intervene through expanding medical schools to register more medical students.

3.3 Improving hospital admission by reducing stay time in hospital or expanding hospitals

Similarly, OECD (2013) stated that Australia’s healthcare industry need to create a policy where thehealthcare process is done quickly to reduce the number of days patients stay in hospitals. This practice ensures the hospitals and healthcare institution can accommodate more patients.

3.4 Creating a clear structure

Jacobides (2007, p.457) also stated that matrix structure which is currently adopted by industry has some shortcomings such as complex chain of command, inefficient communication. In addition, Lim, Griffiths and Sambrook (2010) stated that since the industry is large, it entails complex operations, many management levels, less efficient decision making practices, no teamwork, rigid, and strict rules and regulation which is highly checked (Lim, Griffiths & Sambrook 2010). It I important to create a clear structure from top to bottom level of authority and assign roles. Proper structure and assigning of roles makes the system smooth and efficient because it determines what each officer does in the system, whether it preparing the budget or determining medicines to purchase. Also, when roles are assigned role duplication and conflict is reduced.

3.5 Managing cultural differences

Firms which do understand the practices concerning another culture are not likely to succeed within that culture. This also happens to Australian healthcare firms which would like to expand to other countries. Some of the purposes for managing diversity include to inculcate cultural intelligence, innovation, to attracting talents and to create an organizational strategy. To manage the situation, managers can create cross-cultural literacy to help the staffs understand other people’s culture. Schwabenland and Tomlinson (2008, p.324) urged that Managing diversity also means hiring and training culturally diverse candidates to fit into the organization and help the organization understand the need of the new target market. Staff acceptance is crucial to attaining the diversity program goals. According to Aoun (2007), the way to realize this practice is by creating or forming an impartial diversity committee which represents all cultural diversity of healthcare institution. The top leadership should play a role in empowering the committee to create the diversity statement. The statement should be consistent with the company vision. The committee should be there to guide the employees. On the other hand, Polycentric Staffing can be considered one of best strategies which can be used by Australia’s healthcare firms in reduces the effects diversity. This practice entails hiring of nationals from target-market for lower levels of management up to the top level with only a few slots for expatriates (Schwabenland & Tomlinson 2008, p.326). If the hospital or hospice expands into another foreign market, the process will reduce the negative effects of cultural diversity.

3.6 Approving Technology

The research has found out that technology is fast advancing in the medical industry. As a result, some firms are finding it hard to compete. Management experts claim that for firm to gain competitive advantage, information technology must be improved form part of their agenda. Integrating IT into a business is very expensive. It means a business which wants to incorporate information technology must set a high budget to get the best IT infrastructure and tools (Chebrolu & Ness 2013, p.8). Healthcare industry players use IT in several areas of management including office operations, marketing, accounting, booking and security purposes. Equipment like computers, printer, and telephones are essential for official communication between individual staffs and between staffs and customers (Sikora & Langdon 2006, p. 1618). Email, Skype, team viewer and office domains have created a platform for staff communications between themselves and with the customers. Healthcare companies must improve their IT so as to enable efficient coordination of business. Departments installed with IT systems do not need to send individuals with information to take to another department because it can be done through intranets in softcopy format (Ahmed et al. 2011, p. 1102). IT is also used to store very important information for the business including busy secrets. Databases, cloud and other storage devices like hard disk and flash disks provide this opportunity for healthcare industry players to store information large information as they continue to receive more patients each day. Healthcare companies must also invest in the effective electronic medical record. Sikora and Langdon (2006, p.1621) pointed out that inappropriate sharing of information between organizations can either be from approved users who deliberately or accidentally access or spread information in breach of the health facility policy, or from strangers who hack into an organization’s health information system. To improve these problems, care providers should secure access to health care information system applications and secure the underlying information system infrastructures from hackers and intruders (Abdallah 2014, p.170). An electronic medical record system will improve patient outcomes, which would allow leaders to improve on the continuity of care.

4.0 Conclusion

Comparison of industries in terms of competitive advantages and growth has become a common practice in different nations of the world today. In most cases of industry comparison, Porter’s theory of national competitive is often used to draw various competitive and how such advantages can enable an industry to compete at an international level. In this case, Australia’s healthcare industry has been analyzed using this model to show how it can compete with global countries. The research has established that Australia is presently enjoying an improved health status. The collaboration between public and private and between federal and state government has provide process which has attempted through various reforms to create a better healthcare industry. However, despite the success, the system has faced numerous challenges, including shortage of doctors, expensive implementation, and complex structure which ought to be mitigated through different recommendations provide above.

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