Academic journal article Journal of Business and Entrepreneurship

Is Uniqueness Enough? an Examination of the Services of Independent Pharmacies

Academic journal article Journal of Business and Entrepreneurship

Is Uniqueness Enough? an Examination of the Services of Independent Pharmacies

Article excerpt

ABSTRACT

Historically independent pharmacies have relied upon differentiation as their predominant strategy; a differentiation strategy based upon offering services to gain competitive advantage. However, changes in the health care industry are increasing the demands upon pharmacists to be even more customer-focused. In turn, third party reimbursement programs, now a mainstay within the industry, are adversely affecting the profit margins of pharmacies and foreclosing price as a strategic alternative. The resource based view of the firm (RBV) regards the organization as a set of intangible assets and capabilities, with each organization gaining a competitive advantage from its possession of unique skills, knowledge and experiences. While RBV has primarily an internal focus, it encompasses the external view that an organization's performance is also affected by its industry context. This study examines the services offered by independent pharmacies and their industry environment, and how these variables affect pharmacy performance. Using factor analysis, four mixes of service offerings of pharmacies were identified. The findings indicate that industry effects have an adverse impact on pharmacy performance. None of the identified service mixes were associated with higher pharmacy performance. The results suggest that service differentiation strategies and tactics alone may not offset the negative effects of third party reimbursement plans upon pharmacy profitability and success.

INTRODUCTION

Independent pharmacies, like many other small businesses, are confronting a situation where their strategic options may be dwindling. As third party reimbursement plans seemingly remove price as a strategic option, the question becomes what strategic choices remain for independent pharmacists. Historically small, independent pharmacists have relied upon differentiation as their predominant strategy; a differentiation strategy, one based upon offering unique services to gain competitive advantage within their communities.

The resource based view of the firm (RBV) views the organization as a set of physical and intangible assets and capabilities, with each organization possessing a unique set of skills, knowledge and experiences. RBV has primarily an internal focus upon the skills and capabilities amassed by the organization. However RBV also encompasses an external view of the industry and the competitive environment. RBV thus combines the internal analysis (a more recent field for strategy research) with external analysis (the focus of earlier strategic approaches); (Mauri & Michaels, 1998; Collis & Montgomery, 1995). RBV complements, not necessarily replaces, the strategic analysis which focuses upon an organization's industry context.

The strategy of a firm and its industry context are factors which predict a firm's ultimate success and survival (Sandberg & Hofer, 1987). Environmental conditions, including changes in a firm's competitive environment, place intense demands upon organizations when making key strategic decisions (Dess, Lumpkin,& Covin, 1997). The industrial organization perspective (I/O economics) argues that market structure is the principal driver of performance outcomes. The industry's common structural characteristics lead its constituents to share competitive behaviors or methods. In dynamic contexts, firms within an industry imitate the competencies and skills of successful competitors, which results in a convergence of competitive behaviors. The firms within an industry move toward competitive parity, which enhances the ability of all firms to survive (Mauri & Michaels, 1998; Barney, 1991).

Firm performance is contingent upon the competitive tactics adopted in response to the changing competitive environment (i.e., which service shall be offered); (Covin, 1991). Under either RBV or I/O economics, strategy is fundamentally dependent upon being different. …

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