The previous Assignment identified Fresenius Medical Care AG & Co. KGAA, corporate-level strategies, business strategies, and functional strategies. Fresenius Medical Care AG & Co. KGAA’s long term strategy is to consolidate its expertise to acquire profitable growth by becoming the world’s largest provider of dialysis products and treatment. This Assignment seeks to identify, evaluate, and implement alternative strategies that could drive Fresenius Medical Care AG & Co. KGAA growth strategy.
Generation of alternative Strategies
- Corporate level strategy; Expand market territory
According to the Fortune Business Insight (2020), the value of the global dialysis market in 2018 stood at $92.78 billion and is projected to grow to $136.15 Billion by the end of 2026. Although Davita and Fresenius Medical Care control a combined share of 80% of the US market. However, the individual analysis of the company’s Company data and estimates (2018) reveals that the company controls 69% in North America, 98% in the Asia Pacific, 89% in Latin America, and 92% of the market in Europe Middle East, Africa, Latin America. The company market share in North America is by far the least; hence, the company corporate level strategy would be to pursue a global strategy for growth (Chapter8, Saylor Org 2014, 243), particularly the USA market.
According to the Global Market Insight Report (2018), the US dialysis market is projected to face dramatic growth because of an increase in patients with Diabetes and other chronic diseases. Additionally, Technological innovation, as well as favorable reimbursements, will prove beneficial for the Fresenius Medical Care group. Secondly, as earlier noted, Fresenius Medical Care services such as care ordination are only limited in the Asian Market and North America Market. In retrospect, the company should pursue market development to bring products that exist in the mentioned markets to other markets.
2) Business level strategy
Since the focus of the company is to grow its market share in the North American market, then the company can pursue differentiation and diversification in the US market (Chapter8, Saylor Org 2014, 245). Over the years, the focus of the company has only been on dialysis products; however, with time, the company pursued cardiovascular outcomes and treatment and also integrated care coordination functions in health care (FRESENIUS MEDICAL CARE AG & Co. KGaA., 2018). While the company has expanded care provision, most patients still find the company services to be expensive. Thus it is advised that the company should diversify its product line. Furthermore, the company’s branded pharmaceutical products are overpriced relative to generic drugs and other competing medicines. As a result, the company should consider pricing its products such that they are not only affordable but also easily accessible. Accessibility is paramount because pharmacies will only buy products whose profit margin will still be favorable to the end consumer.
3) Functional Level strategies
As earlier noted, the focus of the company is to increase its profits by increasing its market share. This calls for efficiency in support functions such as procurement, Research and Development, marketing, and finance operations. The concentration will be on marketing. The company should increase its marketing budget to integrate core areas. For example, apart from selling products to specialized clinics, dialysis clinics, and hospitals, the company can also concentrate on direct home dialysis patients. This will require a lot of coordination and mostly cordial relationships with the physicians who may refer the products to the patients. Marketing efforts such as direct sales, direct promotions, warranties, and sponsorships can also be useful in winning new markets.
While all the strategies mentioned earlier can help and support the organization’s objective of expanding its market share and productivity. Unfortunately, a combination of limited finances and time means that the company has to identify tradeoffs and choose what strategies work best for them. The following is the list of strategies that are to be pursued;
- Joint Ventures, Strategic Alliances, Partnerships and so on
- Promote Market development in all markets
- Product differentiation
- Differentiate Pricing
- Marketing budget
- Marketing Promotion Activities
Figure 1: BCG Matrix
The BCG matrix is a strategic management tool that classifies business strategies according to their industry growth relative and the market share (Barney & Hesterly, 2008). The model comprises of 4 quadrants; cash cows, and stars present the strategy that will give the company high market share and growth while question marks and dogs have low market share and market growth.
Based on the above, strategic business units that have high market growth rates and elevated market are called stars. The company can thus integrate measures such as market development, horizontal integration strategies (acquisitions, joint ventures, strategic alliances, and partnerships) to grow.
On the left are the business units that have low market share and high market growth rate; this includes product diversification and incorporating care coordination plans in other markets. These units require close attention to whether the co. should invest in them or divest away from them. For example, care coordination plans may not work in other markets, especially in developing countries that do not have robust health systems.
The strategic business units that have high relative market share and the potential to drive the market are classified under the cash cows; this comprises of all marketing activities that can drive sales.
Lastly, the strategies that are likely to bring the Co. low market share and growth rate are classified under the dog quadrant. Here price differentiation is placed under this quadrant because the Fresenius Medical is a cost leader with a focus strategy, reducing prices may not be strategic and will also limit the company’s ability to differentiate its self on quality.
Scholars present varied opinions as to the right selection criterion (Barney & Hesterly, 2008), understandably because organizations vary widely, and thus the underlying focus in choosing a given strategy may also differ because of individual distinct organizational factors. For this study, the strategies will be selected based on the following criteria;
- The impact on the organization’s growth
- Impact on company’s objectives
- Contribution to innovation
- Available finances
- The cost-benefit ratio
Strategy recommendations will follow the Goals, Strategies, Objectives, and Tactics (G’SOT) Tool. With this said, what follows
Goal: Increase market share in the American market
Strategy: Engage in global business through pursuing corporate-level strategies, including market development, horizontal integration, acquisitions, strategic alliances, partnerships, and joint ventures.
Objective: Increase the market share to surpass the 69% mark.
Tactic: Deploy substantial marketing promotion activities, leverage partnerships by buyouts, and strategic alliances.
Recommendation: a) Pursue global strategies to increase market share; b) Increase marketing efforts
According to Fresenius Medical Care annual report (2018), the company’s long term objective is to grow as a global player. A significant factor in the growth of revenues for the company has been achieved through acquisitions and strategic alliances with care providers. The company is viewed as a strategic partner, because of its record in managing dialysis patients, improving patient satisfaction and quality as well as advancing innovation at a reduced cost of care. Based on this, the long term objective company can use a combination of global strategies such as market penetration and strategic alliances to enter into partnerships with existing players. The purpose of global strategy is to propel an organization towards growth, and profit maximization. Utilizing a global strategy will also help the company increase its competitive advantage while delivering unique and innovative products to the market (Chapter8, Saylor Org 2014, 245).
The CEO is responsible for communicating the vision to all the relevant stakeholders (Franken et al., 2009). Communication should be comprehensive to tackle business objectives. After describing the vision, managers responsible for marketing and finance will be tasked with communicating and implementing the strategies at the business and corporate level. In this case, the corporate level strategy is to engage in partnerships and strategic alliances, while the business level strategy remains the same, which is to focus on the existing business area; dialysis and non-dialysis products. The company may have to select leaders to oversee implementation of the strategy in the newly acquired subsidiaries, and also joint ventures.
The functional level strategies involve marketing managers integrating robust market measures to win new partners and markets. Functional level strategies may also mean training the sales and marketing team on a myriad of effective marketing strategies.
The company can create measurable goals at each level, including the specific outcomes that are to be achieved in the long, medium, and short term. Managers heading the relevant organizations can specify the milestones that are to be delivered. For example, assuming that the partner has been identified, and all the regulatory measures have been met then the short term goals will look like;
Corporate level; Establish a presence in the market (location)
Business level; ensure no diversion from the trade area
Functional; align marketing efforts to pursue customers within the identified markets
Individual managers can establish benchmarks numerically and non-numerically to capture qualitative factors such as employee difficulties (Franken et al., 2009). The managers will continuously measure the progress towards these goals. In addition to KPI, feedbacks, and surveys from the customers and employees can offer valuable insights into the progress and also highlight possible areas of improvement.
Evaluation should be done continuously; this way, managers can identify variances, set realistic goals, and take corrective measures on time to rule out further deviations from the objectives and even discontinue operations. For example, at the functional level, the marketing team can analyze the marketing efforts that are working and those that are not working and correct or discontinue those that are unviable. This should be done with consultation with the sales team. Corrective measures may also entail identifying skills shortage and revamping them. At the business level, the manager will be in charge of ensuring the company remains focused within its core business and also identify auxiliary services that fit within the core business. To this end, the manager in charge can integrate these services, this is because each market has different needs, so customization is paramount to providing patient-centered care. Lastly, Corporate level strategies are often long term. Therefore, so if the corporate objective has not been achieved in the long run, the CEO and key leaders may identify KPI, such as financial measures and patient satisfaction scores. After this, the Managers may choose to integrate measures to improve the same or altogether discontinue operations.
The dynamic and competitive business environment presents a unique challenge for senior managers to develop robust strategies for long term growth and survival. Fresenius is a global leader in the dialysis market. However, its market share in North America is significantly lower in comparison to its market share in the other markets. In retrospect, the US market is the target market for growth due in part of favorable growth forecasts. The focus strategy seems to work best at the business level strategy because diversification may drive the company away from its goals. Correspondingly, marketing activities at the functional level will help promote the company’s growth strategy. Most important is that the organization should not stop at strategy implementation. Evaluation of strategies should be conducted continuously to enable managers to identify shortcomings, adjust goals realistically, and also identify areas that need improvement.
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Fortune Business Insight. (2020). Dialysis Market. Retrieved from https://www.fortunebusinessinsights.com/dialysis-market-102367
Franken, A., Edwards, C. & Lambert, R. (2009). Executing strategic change: Understanding the critical management elements that lead to success. California Management Review. 51(3): 49-73.
FRESENIUS MEDICAL CARE AG & Co. KGaA. (2018). Form 10-K 2018. Retrieved from SEC EDGAR website http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_FMS_2018.PDF
Global Market Insight. (2018). The Dialysis Market. Retrieved from https://www.gminsights.com/industry-analysis/dialysis-market
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