Relationship Between the Brand Equity and the Sales of Bottled Water Industry Essay Example for Free

Relationship Between the Brand Equity and the Sales of Bottled Water Industry Essay This research basically pertains to find out the relationship between the brand equity and the sales of the product. The questionnaire was constructed and the pilot study using 15 respondents from ICBS was carried out to ensure that there were no confusions or ambiguities in the questionnaire. All ambiguities or confusions found were removed before administering the final questionnaire. The questionnaires were divided into two parts. On first of June the questionnaires were administered among half of the sample. The other half of the questionnaires among the remaining samples on 1st July 2007. As our research was basically descriptive in nature, we then quantified the values we were given in the questionnaire results and used them to graph the responses of the elements of the research. The results were then analyzed. Introduction The broad area of the research is related to the currently existing situation in the bottled water industry. As the bottle water industry is flourishing in Pakistan and new competitors are entering the market but still Pure Life has managed to maintain the considerable amount of market share due to its brand equity. The concept of brand is integral to the success of any given product. Brand equity necessarily affects the performance of a product. The concept of brand equity can have a marked effect on the longevity of a products performance. Brand equity is defined as the bundle of intrinsic features/attributes delivered by a branded product or service. It is measured as the price differential someone is willing to pay for a particular branded product or service over an identical product or service that is unbranded. Alternatively, this definition can be re-crafted to state that brand equity is the difference in utility between two products or services that are perceived to deliver an identical set of tangible benefits at the same price. Consumers see a particular brand name as a contract. A brands name may reduce consumers sense of uncertainty, allowing them to purchase, uncertainty reduction, or trust, thus improving their sense of value. Background Nestle have taken a strong interest in Pakistan at a time when the country’s food, drink and retail industries in general are all actually struggling to attract large-scale multinational investments of this nature. Although these companies all have more profitable product categories, which are their primary concerns in more developed markets, in Pakistan a key element of their business strategy at the present time is a strong presence in the increasingly competitive bottled water industry. Should economic growth continue, the introduction of their added-value, more premium products, will simply prove a bonus at a later date? Such investment cannot help but drive bottled water sales in Pakistan, while inflows from multinationals also provide much needed jobs and contribute to essential infrastructural developments in the country. However, there is a huge flipside to these advantages the creation of a population, which can barely afford to spend beyond necessity, reliant on a product that is still considered a luxury item in some of the worlds most developed economies. Pakistan’s response to this dilemma affects not just its population, but its likelihood of establishing itself as a destination for much sought after food, drink and retail industry investment in the future. Literature Review Brand equity is the value built-up in a brand. It is measured based on how much a customer is aware of the brand. The value of a companys brand equity can be calculated by comparing the expected future revenue from the branded product with the expected future revenue from an equivalent non-branded product. This calculation is at best an approximation. This value can comprise both tangible, functional attributes (e. g. TWICE the cleaning power or HALF the fat) and intangible, emotional attributes (e. g. the brand for people with style and good taste). It can be positive or negative. Positive brand equity is created by effective promotion and consistently meeting or exceeding customer thoughts. Negative brand equity is usually the result of bad management. In the early 2000s, the Ford Motor Company made a strategic decision to brand all new or redesigned cars with names starting with F. This aligned with the previous tradition of naming all sport utility vehicles since the Ford Explorer with the letter E. The Toronto Star quoted an analyst who warned that changing the name of the well known Windstar to the Freestar would cause confusion and discard brand equity built up, while a marketing manager believed that a name change would highlight the new redesign. The aging Taurus, which became one of the most significant cars in American auto history, would be abandoned in favor of three entirely new names, all starting with F, the Five Hundred, Freestar and Fusion. By 2007, the Freestar was discontinued without a replacement, and Ford announced record losses. In a surprise announcement, the discarded Taurus nameplate would be re-used on an improved Five Hundred which had disappointing sales and whose nameplate was recognized by less than half of most people, but an overwhelming majority was familiar with the Taurus. Brand Equity and Market Share Very often only the market share of a brand is looked at as a means of determining how successful the brand is. Although market share is of importance in assessing the performance of a brand, its relationship with brand equity is of great significance, as this relationship can be an indication of the potential success of a brand, or alternatively can direct strategy on how to attain such success. The following diagram illustrates the relationship between brand equity and market share: Brand equity and market share are not always proportionate. As can be seen from the diagram, the ideal place for a brand to be situated is in the top-right quadrant. This shows that the brand is successful in that it has a strong brand equity and high market share. However, this may not always be the case. It is possible that a brand may have high brand equity, but may not have an accordingly high market share (top-left quadrant). In order to improve the market share of a brand in cases such as this, regard must then be had to in-store issues such as display, shelf space, distribution etc. Thus, understanding brand equity plays an important role in that it gives an indication of how a brands performance can be improved. Where there is low brand equity and a strong market share (such as the bottom right-hand quadrant), the situation is extremely tenuous. Although the picture may look good owing to the strong market share, the reality is that, with weak brand equity, the product is vulnerable to competitor or other in-market activity. Therefore, measuring only the strong market share does not give the complete picture brand equity must also be considered, and by improving this, the full potential of the brand can be secured. What is Brand Equity? In layman terms brand equity is the value that a consumer attaches to a certain brand. Although brand equity can be measured tangibly by way of certain indicators, a large component of the concept is intangible, i. e. what perceptions and associations people have of a certain brand, and the familiarity of those brands in the mind of the consumer. The diagram below illustrates how brand equity is made up: From the diagram, it is evident that the sources that drive brand equity (brand awareness, consideration and the factors associated with it) will lead to certain outcomes. And the more powerful the sources are, the more significant these outcomes will be. Thus, a strong brand loyalty and ability to command a price premium will lead to resilience against any negative short-term market factors. And this is why brand equity is essential in assessing the performance of a brand: it has the potential to secure the success of the brand against many variable in-market factors. Further, the importance of brand equity is that, by understanding how brand equity drives market share, it is then possible to make use of this knowledge in order to grow the market share of a brand. Understanding the link between brand equity and market share will thus assist marketers in which strategies are required to grow market share. The Benefits of Brand Equity: What are the benefits of strong brand equity? Well, strong brand equity leads to, inter alia, strong market share, customer loyalty, more favorable response to price increases, less vulnerability to competitor activity, brand extension opportunities, and communication messages which reach the consumer. In attaining these benefits, strong brand equity will ensure that a product is of an enduring nature. Ultimately, strong brand equity will improve profitability. To build a winning brand, therefore, is to understand the relationship between brand equity and market share, and to leverage both to their full potential. In so doing, a brand will be successful and sustainable in the long term. It must be kept in mind that increasing market share does not increase brand equity, whereas increasing brand equity invariably leads to increased market share. Another benefit of brand equity is that it’s an asset which can be sold or leased. The importance of brand equity to customer loyalty: Keller (1998) argues that brand equity is unique from customer loyalty, and can be defined as: †¦ the differential effect that brand knowledge has on consumer response to the marketing of that brand. He argues that a brand possesses positive customer-based brand equity when customers react more favorably to a (brand identified) product and the way that it is marketed as compared to when it is not. Brands can also possess negative customer-based brand equity, expressed when consumers react less favorably to the marketing activities associated with a brand, as compared to an unnamed or fictitious named version of the product. Keller (1998) further states that one of the characteristics of brands possessing strong brand equity is stronger brand loyalty. This position appears consistent wit that of Aaker (1991) who argued that brand loyalty could be considered both a dimension and an outcome of brand equity. Problem Statement The problem statement of the research is to find out that â€Å"Are pure life sales greater than competitors due to brand equity of Nestle? † Nestle pure life was launched in Pakistan in 1998. The brand now holds a solid position as number 1 in Pakistan by having more than 50 per cent of the countrys small bottled-water market of 33 million liters (35 million quarts) a year. Pure Life is everywhere at roadside stalls, gas stations and rest stops. Its hawked at street corners in traffic-clogged Lahore. Middle-class shoppers buy it by the case in supermarkets. On the remote mountain road leading from Islamabad to the hill town of Murree, Pure Life billboards urge drivers to drive only Nestle Pure Life. At small stores along the way, a flurry of banners proclaim: Pure Safety, Pure Trust. The ideal water. From Nestle with love. As the purchase of the bottled water involves low involvement of consumers therefore factors such as price, packaging and taste are not as important as compared to the brand image of the product. Therefore, the research is conducted to find out whether the equity of a brand affects the sales of the product or not Limitations, Delimitations and Assumptions The concept of brand equity is important to every brand therefore it can be applied to every product in the Pakistani market. For the purpose of simplicity, researchers chose water bottled industry of Pakistan. In this industry Nestle Pure Life was chosen due to the fact that as purchase of bottled water involves low involvement of consumer so the only thing that matters for the consumer is the brand name. Furthermore another reason for choosing Nestle Pure life was that the researchers assumed that the sales of Nestle Pure life were greater than competitors due to brand equity of Nestle. There was another limitation that the researchers would only focus on a particular age group of people i. . people between 20-25 yrs of age. Theoretical Framework In the research the independent variable is brand equity, the dependent variable is sales, whereas there are three intervening variables identified which affect the relationship of independent variable and the dependent variable which are, production capacity, distribution and availability. There is a positive relationship between the independent variable and the dependent variable because it’s assumed that the brand equity causes an increase in the sales of a product which is Nestle Pure Life. Coke and Pepsi entered the bottled water industry as their production capacity was 18000 crates but after production of sodas their production plant was idle so they decide to jump in the bottled water. industry. They had the advantage that the industry is developing and consumers are becoming conscious of the importance of pure drinkable water. And their setup was already developed. Their distribution is extensive and they can capture all the consumers who buy their sodas. There is a positive relationship between sales and the intervening variables that are production capacity, distribution and availability. Nestle has an advantage over the other bottled water competitors due to the fact that they are the market leaders and their production and distribution is much more then the other competitors and their production plant and capacity is only used for the bottled water only. Their availability is much more extensive because nestle food products are distributed all over the country and hence they utilize their already developed distribution setup. Hypothesis The hypothesis that the researchers intended to test was the following: â€Å"Pure life sales are greater than competitors due to brand equity of Nestle† Nature of study The type of research is basic or pure because the study aimed to find out the affect of brand equity on sales of Nestle Pure Life and literature review was done to find out the relationship between brand equity and sales and primary study was also conducted by distributing questionnaires to MBA students of various universities. The relationship between the brand equity and sales is also generalizable. No matter what the product is there is always the positive relationship between them. Purpose of Study The purpose of the study is descriptive. The study will help in better understanding of the relationship of brand equity of a product and its sales. It will also help the organizations to make decisions related to brand awareness, brand loyalty and brand preference that will affect the brand equity of a product. It will also help other researchers to work on the similar concept. Throughout the study the researcher interference was minimal as there was no control of researcher on the independent variable which was brand equity. The type of investigation was correlation as the study aimed at finding the relationship between the independent variable and dependent variable. It was a field study done in non contrived settings. Methodology Data Collection The initial data for research was obtained through secondary sources of information, which included internet articles, journals and books. It would not be enough to substantiate the hypothesis; therefore, the data collection technique of questionnaire survey shall be used. Population Our target population consists of business schools students in the age group of 20-25 years using Nestle Pure Life. Sample â€Å"Proportionate stratified random sampling technique† was used for the sample. UniversitiesNumber of Elements Proportionate sampling NCBA250250 * 32% = 80 LSE350350 * 37% = 130 GCU200200 * 25% = 50 Sample Size Out of the total of 800 students the size of the population, the sample was 80 students of National College of Business Administration, 130 Students of Lahore Scholl of Economics and 50 students of Government College University Lahore. The sample sizes were determined using table given by Uma Sekeran, using 90% confidence interval and standard error of 9. 5. Instruments Questionnaires were used as a tool to gather the primary data for the research. The questionnaire consisted of 7 questions and was administered among NCBA, LSE and GCU students. The questionnaire used in this study was a non-standardized instrument constructed solely for the purpose of this study. Copy of the questionnaire is attached in Appendix I in the report. Scale Dichotomous scale was used for five questions. YesNo Category scale was also used. Multiple items were given to elicit a single response from the respondent. From ranking scale forced choice scale was used which enabled the respondents to rank the brands of water bottles according to their preferences. Pilot Study A pilot study using 15 respondents from ICBS was done to ensure that there were no confusions or ambiguities in the questionnaire. All ambiguities or confusions found were removed before administering the final questionnaire. Reliability The reliability of the instruments was ensured through split- half reliability method. The instrument of the study which was questionnaires was divided into two halves. On first of June the questionnaires were administered among 40 NCBA students, 75 LSE students and 25 GCU students. The other half of the questionnaires among the same number of students on 1st July 2007. The reliability test will reflect the correlation between the two halves of the questionnaires. Validity The validity of our instrument was checked by the content and construct validity test. Results Question 1 Do you buy bottled water? Our population included only those elements who are users or buyers of the bottled water. So as the sample is the replica of the population then it can be said that the sample contained all the users or buyers of the bottled water. Question 2 Rank the following brands of water bottles according to your preference. As this question asked to rank the brands in order of preference it helped us to find out what brand people prefer. The results showed that 45% or 117 consumers prefer Nestle Pure life. Aside from that the other preference were 20% or 52 prefer Aqua Fina , 15% or 39 prefer kinley, 13% or 34 prefer Sufi and the least was aqua safe which is 7% or 18. It showed that the highest demand or preference is of Nestle Pure life. The name Nestle Pure Life was used because it is known as Nestle or Nestle Pure Life among people. Question 3 What are the reasons of your preference? This question asks about why the brand is preferred? And what is the reason for there preference? The results showed that 37% or 96 for international brand, 21% or 55 marked companied credibility, 18% or 47 went for quality seal, 11% or 29 marked packaging, 9% or 23 for price and 4% or 10 for certification. By these results we concluded that most people don’t know about quality seal and certification and some brand don’t have them so it wasn’t marked. One aspect was that those who marked nestle as their preferred brand marked international brand and company’s credibility as their reason for preference. Price and packaging was not such a major factor in their reason for the preference. It was only marked by consumers who use aqua safe and Sufi. Question 4 Do you recall any advertisement of your preferred brand? The results showed that 83% or 216 answered yes and 17% or 44 answered no. It showed that one reason of preference was the advertisement showed. Research shows that it has a major impact on people as it repetitive. It leaves the impression and the companies or brands qualities and messages in peoples mind. They do remember and recall it when buying a product. Question 5 How long have you been using your preferred brand? The results showed that most of the people have been using the brand for more than a year 45% or 117. 37% or 96 were using it for a year, 12% or 31 for 6 months and 6% or 16 for a month. The results also showed that most of the people have been using Nestle and Aqua Fina and Sufi and Aqua safe had a few consumers as they have not been using it for so long. Question 6 In your opinion are you brand loyal to your preferred brand? The results showed that 87% or 226 were brand loyal and 13% or 34 were not. The result showed that students are not brand loyal. But it has been observed that when people ask for drinking water they ask for nestle water. We also observed this at super stores that while passing by the water bottle shelves they pick Nestle. This behavior is same as schools and colleges. Question 7 What if your preferred brand is involved in an unethical business or fraud, will you still buy it? The results for this were that 64% or 166 answered as Yes and 36% or 94 answered as No. It showed that if a companied credibility is in doubt people back of from it. It does show a sense of rightness in people and also that for a brand to be successful it’s important that the company should be credible. As brand equity is the goodwill of the company and it’s important for a company to succeed and be reputable. Is also important because now, with media awareness people are becoming more conscious to these factors, so, the companies have to be conscious of these factors. Question 8 Would you prefer a brand which is popular in your social circle? The results of this question were that 55% or 143 answered as Yes and 45% or 117 answered as No. t helped to show that is the preference dependent on the social behaviors. But the result showed that it has a 10 % difference so it is slightly significance. For some people it who look for acceptance from their circle but it’s not that important as it low involvement purchase and it related to thirst which know no boundaries. But for some its status symbol to use bottled water as some peop le don’t care as long as its water. Discussion If the hypothesis is selected it would mean that the brand equity and brand image is important for the customers. They do take it into consideration while buying as its imprinted in their minds. Advertisement helps the customers to see the attributes of the company and the product . It keeps the brand equity in the minds of the customers. If the hypothesis is not substantiated by the questioner’s results, it would mean that some other factors are involved in the greater sales of the brand besides it brand name and the research would have to be conducted again with a new hypothesis. . Conclusions The conclusion of the study is that the Pure Life sales are greater than competitors due to brand equity of Nestle. The company should concentrate on things like brand preference and brand loyalty. They can do this by a lot of advertising and other promotional campaigns like public relations. Brand preference, brand loyalty and trust leads to establishment of brand equity which can be said as goodwill. Implications Brand equity is the customer’s subjective and intangible assessment of the brand, above and beyond its purely perceived value. In a market where many products are rather similar (i. e. commoditization), the brand can have a large effect on whether customers want to buy the product and what price theyre willing to pay. Brands therefore add more and more value to the basic product or service. Example: although a blind test panel taught researchers that most people prefer Pepsi above Coca-Cola, yet Coca-Cola is much stronger on the market. Our research findings shall help marketers understand the relation between brand equity ad sales. We have used Nestle Pure Life as a model for the study to illuminate the same relationship. As mentioned earlier, if there is a relationship between the variables, the marketers need to take it into account while designing their marketing strategies and policies.

Narration in The Turn of the Screw Essay -- The Turn of the Screw Henr

Narration in The Turn of the Screw Henry James makes the governess the narrator because she keeps the readers’ interest by also being involved in the story as a main character. However, being involved on this personal level, it can make the governess exaggerate at times and be over-emotional. Her determined and curious nature makes her an ideal candidate to explore the mysterious happenings, however her imagination keeps the reader in suspense, as we are never sure how much she has exaggerated the story. This also adds tension as the full picture is never revealed. This choice of narrator is therefore challenged by Susan Hill’s description that a narrator should be ‘unimaginative and straightforward’ as the governess’ increasing exaggeration, hysteria and ambiguity make her less than straightforward. The governess’s character is established at the beginning of the novel when she meets the master. Her impressionability is displayed when he immediately charms her. She has little experience at being a governess as it says she is ‘The youngest of several daughters of a country parson’, which also indicates her simple country background. Her naivety also makes her very romantic and imaginative. James writes that she has ‘†¦come up to London from the country’ which hints that the governess is very determined and eager for the job. Her trusting nature is also revealed when she doesn’t question the master’s bizarre rule; ‘that she should never trouble him again.’ She doesn’t question him, as she is enthralled and under his spell, hinting at her infatuation. This also could mean that the narrative would be biased in his favour. The governess first sees Peter Quint at dusk in the first few weeks of her gove... ...ry tragic and ambiguous circumstances. It is very intense at the end, because it is just the governess and Miles, and the governess is trying to force a confession out of him. When he does confess, Peter Quint appears and the governess immediately tries to protect the boy, seeing herself locked in a battle of good versus evil, where she is good and Peter Quint is bad. There are also several alternative reasons for Miles’ death open for interpretation to the reader; either the governess smothered him, shock (from seeing Quint), or Quint is involved somehow. The line ‘Peter Quint- you devil’ is in addition ambiguous. Miles is either confessing that Peter Quint is a devil, or that he sees the governess as tormenting him. James ends the story in this way because it leaves the reader questioning how the boy died, and the narrator’s sanity is also questioned. Narration in The Turn of the Screw Essay -- The Turn of the Screw Henr Narration in The Turn of the Screw Henry James makes the governess the narrator because she keeps the readers’ interest by also being involved in the story as a main character. However, being involved on this personal level, it can make the governess exaggerate at times and be over-emotional. Her determined and curious nature makes her an ideal candidate to explore the mysterious happenings, however her imagination keeps the reader in suspense, as we are never sure how much she has exaggerated the story. This also adds tension as the full picture is never revealed. This choice of narrator is therefore challenged by Susan Hill’s description that a narrator should be ‘unimaginative and straightforward’ as the governess’ increasing exaggeration, hysteria and ambiguity make her less than straightforward. The governess’s character is established at the beginning of the novel when she meets the master. Her impressionability is displayed when he immediately charms her. She has little experience at being a governess as it says she is ‘The youngest of several daughters of a country parson’, which also indicates her simple country background. Her naivety also makes her very romantic and imaginative. James writes that she has ‘†¦come up to London from the country’ which hints that the governess is very determined and eager for the job. Her trusting nature is also revealed when she doesn’t question the master’s bizarre rule; ‘that she should never trouble him again.’ She doesn’t question him, as she is enthralled and under his spell, hinting at her infatuation. This also could mean that the narrative would be biased in his favour. The governess first sees Peter Quint at dusk in the first few weeks of her gove... ...ry tragic and ambiguous circumstances. It is very intense at the end, because it is just the governess and Miles, and the governess is trying to force a confession out of him. When he does confess, Peter Quint appears and the governess immediately tries to protect the boy, seeing herself locked in a battle of good versus evil, where she is good and Peter Quint is bad. There are also several alternative reasons for Miles’ death open for interpretation to the reader; either the governess smothered him, shock (from seeing Quint), or Quint is involved somehow. The line ‘Peter Quint- you devil’ is in addition ambiguous. Miles is either confessing that Peter Quint is a devil, or that he sees the governess as tormenting him. James ends the story in this way because it leaves the reader questioning how the boy died, and the narrator’s sanity is also questioned.

Case Analysis: Medical Center of Southern Indiana Essay

Introduction The Medical Center of Southern Indiana (MCSI) has had a turbulent tenure as a hospital since its inception in 1973. Unprofitable from the very beginning, MCSI has gone through multiple ownership changes, creating a distrusting atmosphere between Clark County, IN residents, the local medical community, and MCSI. The city of Charlestown purchased the hospital at the end of 1991 in the hopes of turning the facility into a profitable medical center offering key services to the community. An aggressive expansion strategy was developed by management contractor American MedTrust in 1992 and this led to an operating profit in 1998 of $480,545. This marked a turning point for MCSI, as it was the first year in a very long time that the hospital had turned a profit. As they look to the future, MCSI needs to determine if it should continue with the aggressive strategy of expanding services or slow its expansion pace and focus on providing excellent service within its current capacity and looking for ways to reduce cost and enhance revenues. Key Demographics and Facts Certain elements of the MCSI case are essential in determining the appropriate strategy to pursue in the future. The external community general hospital environment has not been thriving during this time period. Of the roughly 5,000 community hospitals in the United States in 1997, 22% had bed capacity of 50-99. From the year 1980 to 1997, the number of hospitals with 50-99 beds decreased by 24%. As a 96 bed facility, the national trend does not bode well for MCSI. When the hospital was purchased by the city of Charlestown, American MedTrust came in with its aggressive â€Å"revitalization initiatives† to help MCSI become profitable. Under American MedTrust’s leadership, MCSI spent more than $3 million from 1992 to 1998 to accomplish these aggressive strategies. Two key elements of those initiatives involved expanding the services offered and rebuilding relationships with insurance companies and the local medical community. As a full-service hospital, MCSI already offered a variety of medical services. Because of a consistently low census (occupancy rate around 45%), developing ways to attract new patients was vital. A new inpatient geropsychiatric unit, skilled nursing facility, and a home health agency were added to the mix when hospital executives determined that there was a need in the community for these services and that the competition was not offering these services. By 1998, all three new service lines were bringing in at least $1 million in gross revenue. Other key investments included the creation of an outpatient mall, purchasing new technology, and the creation of satellite specialty and primary care clinics. Finding and expanding sources of revenue was also a key feature in the aggressive strategic plan. MCSI knew that to enhance revenue, the hospital had to contract with managed care companies. Because of sour relationships between MCSI and the insurance companies, MCSI enlisted the help of the state legislature and the state insurance commissioner to pass the Any Willing Provider bill that required insurance companies to work with providers like MCSI and provide written explanations for any declinations of contracts. In 1994, MCSI had two managed care contracts; there were twenty-five managed care contracts in 1998. With 65% of its patient base on Medicare, it was essential for MCSI to increase these managed care contracts if the organiza tion hoped to expand their revenue stream. Because of the enhanced services offered, the number of full time equivalent employees also increased from 183 in 1994 to 270 in 1998. MCSI has benefited from a low 11% employee turnover and a lean organizational structure. Even with these systems in place however, the salary and wage expense has nearly tripled from $3.3 million in 1992 to $9.88 million in 1998. Of the 270 FTE employees, there are 75 active members of the medical staff. Gross revenue generated by physician was a bit lopsided in 1998 with 11 out of 75 physicians generating almost 75% of the gross revenue. As MCSI plans for the future, revenues generated by physician, by department, and the related salary expenses need to be carefully examined to determine the optimal mix of services provided to the Clark County community. The location and demographics of Clark County continue to provide challenges for MCSI and the creation of future strategic plans. Clark County is a rural  area with the majority of its population living in the southern half of the county, near the Indiana and Kentucky border. While Clark County does enjoy a low 2.7% unemployment rate, the average county household income was a middling $36, 726 in 1997. Only 11% of Clark County residents had earned a bachelor’s degree as of 1998, thus the probability of the average household income increasing by any great degree was small. 65% of the MCSI patient base in 1998 was a Medicare patient. MCSI is located in the north central section of Clark County. Its closest competitor is Clark Memorial Hospital in the southern half of the county. Clark Memorial has about 3 times the number of beds as MCSI and the majority of the county’s population lives closer to Clark Memorial. Louisville, KY is about 15 miles from MCSI. Any future expansion plans must include a close analysis of the population growth trends in the area and an analysis of the service mix offered by both competitors, Clark Memorial and the Louisville-area health systems. Both of these competitors are better positioned to capitalize on any growth trends in the area and have the financial resources to aggressively expand to meet these trends. Even though MCSI has posted an operating profit for the first time in many years, the majority of MCSI’s assets are tied up in receivables. The current ratio and days cash on hand are well below industry standards. With increasing salary expenses and various interest expenses increasing, investing in capital expenditures or investing large sums of money in new service lines might cause MCSI’s operating profits be negative. Recommendations The Medical Center of Southern Indiana should continue to grow and improve the service lines that are currently offered such as home health, skilled nursing, and geropsychiatric services. These services have been marginally profitable in the past for the facility. The home health agency has seen a tremendous growth increasing from $422,000 to $1.75 million in four years. Skilled nursing facility revenues have grown in four years from $1.07 to $4.7 million. In order to keep these existing service lines thriving, MSCI should plan moderate renovations that keep the facility up to date with current service lines. Renovations should be similar to the $300,000 remodeling that was done to the outpatient service mall and should include the purchase of medical supply equipment that will help MCSI stay up to date  with its competitors. Large capital expenditures should be avoided at this time. Additionally, MCSI should expand its marketing campaign to target the local populations and keep patients from the surrounding five counties from migrating into the Louisville area to receive care. This has been a problem for the facility in the past, and has led to losses in revenues. Another point of emphasis that should be addressed is the inclusion of the Ivy Tech College population and the Indiana University Southeast population. This population of students has yet to be targeted by the facility, and are a large source of potential revenue. The marketing strategy should also focus on the recruitment and retention of physicians. Recruitment has been an issue in the past and recruiting and retaining quality physicians is a key component to the success of a facility. Currently, a minority of physicians bring in a majority of the revenues. Having quality physicians that provide services that the community wants and needs will also help enhance revenues. Because so much of the patient population is on Medicare, these revenue enhancement strategies need to be complemented by cost saving strategies. MCSI has a bit more control over their expenses than it does over their revenue sources. After years of having a defender style of strategic plan, this aggressive prospector strategy has allowed MCSI to have the resources to better meet the needs of the community and find a way to be profitable. However, at this point, it would be best to take a step back and shift to analyzer mode before continuing in an aggressive manner. Data The Medical Center of Southern Indiana created a decision matrix to identify decision criteria in pursuing a solution going forward. MCSI choose to analyze physician partnership, its top service lines, expansion of market campaign, and expansion of the Ivy Tech population in order to decide whether or not it should continue its aggressive expansion campaign. Major criteria areas taken into account included market position, competition, potential profitability, and alignment with MCSI’s mission. As shown in Figure 1, it was recommended for MCSI to continue building physician partnership and enhancing its top three service lines (home health agency, skilled nursing facility, and geropsychiatric services). There was the  recommendation to possibly pursue expansion of its marketing campaign and Ivy Tech population. MCSI should slow down its aggressive expansion strategy of adding new services and consolidate gains from those presently in place. In doing so, MCSI would shift from a prospector to an analyzer. MCSI achieved its largest operating profit of $480,545 in 1998. Looking to continue aggressive expansion could potentially lower its operating profit going forward. Overexpansion of services may lead to a dilution in the quality of care. The hospital is already structured as lean to help control costs. With such a low operating profit, MCSI does not have the resources to continue their expansion. As an analyzer, MCSI will look to enhance its existing resources and wait to see what the competition does. Improvements can be made to MCSI’s top three services lines. Allocating resources for future renovations and purchases of equipment will help keep these areas successful and allow them to continue generating profit. These three service lines respond to the needs of the Medicare patient base. For physician partnership, MCSI must keep its physicians who represent a majority of gross revenue. There is a large disparity for both gross revenue brought in and patients seen amongst physicians. Keeping MCSI’s top physicians while also looking to recruit other good physicians can lead to an increased efficiency of patient care and a reduction of cost. Involving the physicians in issues central to care and day-to-day operations is needed for a high physician retention rate for MCSI. It is important to have physicians included in the processes because they are the ones caring for the patients. If MCSI has the available resources, it should pursue expanding its marketing campaign and look into expansion of the Ivy Tech population. The solution for MCSI to focus on its current service lines instead of continued aggressive expansion will require coordination amongst a wide-range of sections within the medical center. Kevin J. Miller, the President and Chief Executive Officer of MCSI is responsible for asserting leadership of the planning and implementation of this solution. He must be involved in the process to avoid disengagement within MCSI. It is critical for him to be a leader, but not take over the entire process. The next step would be defining and communicating the responsibilities and roles of the  organizational leaders in the various departments of the medical center through the Board of Directors and Board of Trustees. It is their role to provide oversight and then let the organization take control. Physician partnership through Independent Practice Association (IPA), home health agency, skilled nursing facility, and geropsychiatric services would involve those under the Physician Affiliates, Chief Nursing Officer, and Assistant Administrator of Specialty Services, respectively. Expansion of marketing campaign and Ivy Tech population would involve those under the Director of Human Resources and Director of Business Development. Those under the Chief Quality Officer are then responsible for insuring the facilities are up-to-date through renovations for these service lines. Those under the Chief Financial Officer would be responsible for keeping track of the records and looking at the profitability from services already in place. All of these areas of MCSI must work with each other through active communication. It is necessary to have strategic plan schedules in order for the solution to be successful. Starting with monitoring day-to-day activities, MCSI should complete a full strategic planning process every three years with annual updates on each of the areas in the decision matrix. MCSI must have the resources to provide for this solution. The solution identified by the decision matrix is responsible for MCSI’s ability to earn and increase annual profit. Collecting data in these areas in addition to monitoring the internal and external environment can allow for MCSI to evaluate effectiveness of consolidating gains from services already in place in the future. Current Status of the Medical Center of Southern Indiana The Medical Center of Southern Indiana became a subsidiary of Saint Catherine Healthcare LLC on May 1, 2006. Questions from the end of the Case: 1.Should MCSI slow down its aggressive expansion strategy of adding new services and consolidate the gains from those presently in place, or continue the aggressive expansion strategy of adding and investing in even more services? We feel that MCSI should not continue its aggressive expansion strategy. Rather, they should focus on continuing the upkeep of their current service lines that have been so profitable for them the past  four years (home health, skilled nursing facilities, and geropsychiatric services) Continuing to expand these existing services is what has allowed MCSI to grow and beat out competitors in some areas. Instead of focusing on expanding the service lines any further, money should be invested to keep existing facilities â€Å"top of the line†. 2.Should MCSI reassess present services and retrench those that are not yet breaking even? MCSI should definitely carefully consider all present services, especially those that are not yet breaking even. Certain service lines will never break even, but are required as part of the community hospital services. However, reducing or retrenching these services could possibly be the best strategy moving forward. 3.Should MCSI change its fiscal orientation and focus on cost reduction versus revenue enhancement? With 65% of the patient base on Medicare, revenue enhancement might not be guaranteed. A combination of cost minimization and revenue enhancement strategies through increasing the number of managed care contracts would be the best orientation for MCSI. 4.Should MCSI pursue a joint venture with physicians in limited partnerships? Yes, MCSI should pursue a joint venture with physicians in limited partnerships. In 1998, 4 of MCSI’s 75 physicians brought in 44% of the gross revenue and 11 physicians brought in almost 75% of the gross revenue, which was $39,679,356. It is critical to identify the top earning physicians and keep them at MCSI. Part of MCSI’s mission is to â€Å"increase physician recruitment, retention, and collaboration.† MCSI must continue to involve the physicians in issues central to quality and their day-to-day operations.

Battle of Stoke Field in the War of the Roses