Background
Founded in 1994 and headquartered in Johannesburg, Netcare is one of the largest South Africa healthcare providers, operating through a wide chain of local hospitals and dental centers. Over the years of the operations the company grew in domestic market organically as well as through acquisition strategy, starting with the acquisition of Medicross, which allowed the organizations to an acquisition of 75 physical facilities, including medical and dental centers across South Africa.
Ricard Friedland, the head of the organization faces several challenges with regards to the future direction of the organization and potential strategies with regards to the organizational growth and expansion. Given the dominating market of the company in the domestic market of 28%, the inorganic expansion opportunities are significantly limited, which forces the organization to look for alternative and innovative strategies to maintain its position in the future. The reality of South Africa medical system is that about 14% of the individuals have the private medical plan. While private institutions offer one of the best medical services, the public sector in South Africa is ranked is one of the bottoms in terms of medical assistance. To support the development of the private sector, the government implemented several policies, including the mandatory medical insurance for all formally employed individuals. Additionally, the Black Economic Empowerment Act (BEE) addressed the issue of inequality in the country, through measurement the performance of the private sector, based on several indicators, such as diversity in employment, management, skill development and enterprise development for people who have historically suffered from disadvantages. In 2008, the government came up with the project of the price-setting bill, which would regulate the tariff setting in a private medical sector.
As a response to the changing market environment, Netcare strategy was based on five pillars: organizational growth, operational excellence, best and safest patient care, passionate people and transformation.
With the potential opportunities son international market and pressure from the domestic economic and political sectors, Netcare started it´s international expansion through the UK market. The know-how allows the organization successfully establish itself, through offering the new approach in client attendance and higher efficiency in cataract procedures. Following the successful experience, Netcare expanded to dental care in the UK and started aggressive acquisition strategy, when in 2006 the company acquired GHG Group, opening the doors to Sweden, Finland, and Germany healthcare market.
The UK expansion was not the unique experience of international growth. In 1997, the company entered Rwanda market with a high-level medical care proposition, but the project failed due to the challenges, related to the government structure and extremely volatile situation and racial war in the country. Acquisitions and various models of entering the new market, equipped Netcare management team with unique capabilities as the consolidator of the fragmented market, focusing on bringing innovation and effective operational solutions to the countries.
Essential Ethical Issues
Netcare operations constitute 28% of the total market in the country and offer employment for 18,900 people. With the size and scale of the operations of the company, his concern with regards to the Corporate Social Responsibility and sustainable practices is paramount for the government as well as the management of the company. There are several central issues, which should be taken into considerations. First of all, the company~s focus on international expansion causes reasonable concern of the South Africa community as well as the local authorities with regards to the social contribution and relationships with the community. The reaction to the governmental effort to control the pricing of the medical services in the private sector to focus on overseas operations is a serious ethical concern, which negatively affects the image of the organization on a local as well as international market. Another important consideration is the business model, which attracts doctors to work on a contract basis as opposed to hiring personnel to the regular basis. This places pressure on the affordability and, arguably, quality of the services, provided to individuals with the cheaper medical plan, where compensation package is lower and qualified personnel works with selected individuals. Finally, the expertise and experience of the company can continue benefitting the local community and it is evident that the growth of the market is limited. One of the ethical concerns, which can be raised by the not-for-profit sector and the government is the mandatory contribution of the private sector to the development of the health care industry as a whole. The failure to enter the underdeveloped market and inability to serve indigent groups of population in South Africa further damage the image of the company (Parkison, 2012).
Conclusions
It is evident that South Africa market for private medical service has reached its maturity and the organizational growth for the major market players is very limited. Given the strategic goals of the Netcare company to expand and grow its international presence through consolidation and improvement of various areas, some of the critical issues and challenges include the choice of growth strategy, Ethical considerations and brand positioning in the local market as well as the strategic fit of the internal capabilities and external environment. Netcare will continue building its international presence to leverage the risks associated with the maturity and, consequently limited growth in South Africa. This strategy is also relevant, given the christening governmental regulations and increasing governance control in the sector.
The history of the company, however, outlines some concerns with regards to the ethical implications and the lack of involvement in dealing with inequality and improvement of the local community. The size of the organization places numerous responsibilities and expectations of the company and the sustainability of the operations and profits highly depends on the management capabilities to build sustainable relationships with external stakeholders.
Leadership Implications
Given the current situation and the future direction of the Netcare company, the management team will face major implications. First of all, the company will have to address the general concern of public and non-for-profit sector with regards to the sustainability of the contribution to the local private medical sector. Secondly, increased presence in the international arena will make Netcare subject to international regulations and CSR community and will demand inflow of more specific knowledge. This means that the management team will have to look at specific change and diversity management strategies to ensure that internal capabilities are aligned with growth ambitions. Finally, it is critical that the company outlines and presents a transparent and coherent domestic market strategy, which takes out pressure from its already tense relationships with local authorities (Lennar, 2015). This should be part of the business growth diversification strategy as the management will face further challenges to maintain quality os service and organizational integrity if the expansion is done solely through acquisitions.
Recommendations
With the above considerations in mind, several recommendations should be done for the company´s leadership. First of all, more attention should be given on rebuilding the positive image of the organization in the local market. It is recommended that Netcare involves in several community projects and takes more active role in building on BEE program success (Rouse, 2008). Secondly, the stakeholder profile has changed significantly with international expansion, which will require specific diversity training and more transparent policy with regards to the medium and the long-term plans of the company. Another important step is to look at diversification strategies to leverage the risks of acquisition growth. Strong reliance on an acquisition of knowledge and physical infrastructure through purchase will have the significant implication on the organizational culture, control mechanisms and governance (Kamaresh and Ram, 1998). Given the rapid growth of the company, it is essential that specific program is developed on the Human Resource Management (HRM) side to manage the pressure and impact of such growth strategy. Internal financing of international expansion through organic growth can contribute to organizational flexibility and responsiveness to the market trends and, reduce the growth by reducing the pace of new acquisitions. Finally, it is evident hat Netcare failed to develop and expand in underdeveloped countries, while such countries as Kenya and Rwanda offer great potential for the organization and allow building on CSR-driven brand (Parkison, 2012). It is recommended that the organization looks at building on an internal potential to develop capabilities and skills to penetrate the underdeveloped market and diversify its business.
References
Parkison, A. (2012). Netcare Management Analysis. Business Economic Project Report - marketing, Corporate Communication, CRM, Market Research, Social Media. New York: Wright State Univeristy. Print.
Lennard H.. (2015). An Empirical Research on the Increasing Importance of Intercultural Competences. Seminar Paper. London: Green Publishers. Print.
Schwartz M.S. (2011). Corporate Social Responsibility: An Ethical Approach. Journal f Economic Studies. 283(3), 202-215.
Kamalesh K., and Ram R. (1998). Meeting the expectations of key stakeholders: Stakeholder management in the health care industry. S.A.M. Advanced Management Journal63.2 (Spring 1998): 31-39.
Rouse W.B. (2008). Health Care as a Complex Adaptive System: Implications for Design and Management. The Bridge [Online]. Retrieved 10 June 2016, http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.404.5971&rep=rep1&type=pdf
