Global Healthcare Exchange

Global Healthcare Exchange

Global Healthcare Exchange is an online trading company with a worldwide electronic sales market base. The company was established in 2000 and has become a household name in the provision of medical products, equipment, and services. During its establishment, major producers of medical equipment in the world, including Medtronic, Baxter Healthcare, Johnson and Johnson, Abbott Laboratories, and GE Medical Systems, came together to enhance their ability to serve the global healthcare supply chain (Applegate & Ladge, 2003). The company’s key strategy was to leverage the ability of the internet to enhance information processing, reduce supply chain costs, and improve customer service to enable the delivery of quality healthcare.

Problem Statement

The company has adopted a mergers and acquisition strategy to cope with aggressive competition within the global healthcare market. This strategy for expansion allows the merging of the company’s resources with others to improve organizational processes and offer a competitive advantage in various regions. GHX bought off Centrimed in September 2000 and then HealthNexis in 2001. The company also merged with Amerinet to bring together the largest healthcare distribution enterprises as its owners. An alliance with Broadline and Medibuy in 2002 enhanced the company’s presence in the United States. The company has also shifted its approach from being product-centric to a more customer-centric approach through various IT improvements.

GHX has performed exceptionally well for a firm of its age, with less than five years of experience. The company’s expansion strategy through mergers and acquisitions of other firms, as well as entering into strategic partnerships, has been largely successful. However, GHX is still relatively small in itself, and in pursuing the acquisition strategies, the company has faced culture and operational issues. These arise from the fast acquisitions of small and large companies that destroy the balance that was beginning to develop. Employee conflict is now present in the organization since its organizational structure was not developed to handle these massive takeovers. Further, the company lacks expertise in different markets, which reduces its effectiveness in serving customers in these regions. For the European market, for example, the different service and product requirements have strained the company’s ability to maintain customer satisfaction, which is affecting GHX’s growth.

Analysis of issues

For GHX, there is a need to improve regional coverage as well as improve the market share that the firm controls. Acquisitions, in this case, are a very sound strategy in enhancing the regional coverage and also improving reliability. However, the rate of acquisitions is affecting the company’s internal structure and decision-making process since the firms acquired require some level of decision-making. Managers who started out in the company earlier may feel less appreciated that before when they lose their independence in making decisions about their regions. Employee conflict has occurred as a result, which can lead to loss of valuable knowledge and experience to competitors due to staff turnover. Staff turnover is also bad for the organization since it increases expenditure to hire and train new staff.

GHX also faces a threat to its current partnerships based on a large number of buyouts and takeovers. The company now has a total of 15 different companies, all looking for an opportunity to improve their operations through strategic partnerships. However, a large number of individuals with an interest in the success of the partnership make it difficult to make decisions quickly. Although the composition of the board had already been laid out and other entrants added respectively, 15 companies are still a very large enterprise that will require massive coordination to ensure GHX continues to advance its goals.

The fact that GHX’s expansion into Europe has experienced some issues points to the inefficiency of the partnerships that the company is making. Since customers are receiving products under the GHX name, it is inevitable that poor customer satisfaction will translate to poor sales for GHX, even when it is an acquisition of the company that made the supply mistake. There is a need to define the regional expertise of all these different firms to guarantee that each organization can meet its responsibility to the whole group.

The issues defined are difficult to solve due to the present and future implications for GHX. To reduce staff turnover in such a case would be difficult since it would involve redefining the company’s organizational hierarchy. Improving operations in Europe would also require the company to develop better supply chain infrastructure or use a company that has experience in European affairs.

Recommended Actions

To change the current organizational structure, I would encourage the company to pursue a strategy that changes its legal status to allow reorganization. This strategy would be to make the company a public corporation through an Initial Public Offering. As shown in the company documents, there has been an initial resistance to issuing an IPO as it was agreed that the legal status of the company would remain as a partnership. As a publicly-traded company with a centralized formation, GHX would benefit due to a central command, conventional internal environment, and better economies of scale. This structure would, however, lead to unresponsiveness and reduced creativity in problem-solving among lower ranks. For a decentralized structure, there would be high responsiveness and better ability to serve remote customers such as in Europe. However, this would be more expensive, has coordination problems, and is difficult to control.

I would also recommend the company to use its massive supply chain to diversify into other products with high productivity and global need. Steel, oil, and gas, or groceries would rely on the same IT infrastructure and B2B models that the company has already set up, allowing it to obtain greater economies of scale and profits. This would lead to GHX becoming a global giant in supplying essential commodities to the whole world. Using Porter’s Five Forces Model, the company has a low threat of new entrants due to the large initial investment and the large technology infrastructure needed. As a supplier, the company will have a high bargaining power due to its technological expertise. Buyers would have bargaining power, although low since GHX would operate global scales compared to regional suppliers who would be more expensive for the buyer. The company would have a first-mover advantage as very few companies can match the scale and product differentiation that GHX can achieve.

In conclusion, the best alternative for GHX would involve the two options above. This involves registering the company as a public company to enhance organizational restructuring as well as better oversight. The company also has the ability to diversify its product offering to engage in sectors such as groceries, oil and gas, or steel. This would place the company among the global supply chain giants, improving its position worldwide.

Reference

Applegate L., Ladge J. (2003) Global Healthcare Exchange. Harvard Business School. Harvard    College