Academic journal article American Academic & Scholarly Research Journal

Micro-Environment Influences on Pricing Strategy in Saudi Private Sector Hospitals: An Empirical Investigation

Academic journal article American Academic & Scholarly Research Journal

Micro-Environment Influences on Pricing Strategy in Saudi Private Sector Hospitals: An Empirical Investigation

Article excerpt

Abstract. Marketing management's job is to build and maintain a strong and long run relationship with target customers by creating value, satisfaction, and loyalty. As a result, marketing success requires building relationships with competitors, suppliers, patients, and third party payers, which combine to make up the hospital's value delivery network. Therefore this research investigates the influence micro environment factors have on the pricing strategy in private hospitals made by the hospital managers. This study proposes and tests a four factor micro enviromnent model that explains the considerable variation in pricing strategy in the hospitals. These factors include competitors (C), suppliers (S), patients (P), and third party payers (TPP). In order to explore this issue, a triangulation method was used to collect primary data through a questionnaire, which was administered in the private sector hospitals in Jeddah city in Kingdom of Saudi Arabia (KSA) and, via in-depth semi- structured interviews with hospital managers and experts in the health services in KSA. The researchers were targeted 19 out of 34 hospitals in this research as representative's sample rather than whole population. A purposive sampling strategy was used to choose the participants in this research. In total, 122 senior managers (including general managers, administrative managers, medical managers, public relation managers, nursing manager, and out patients clinic managers) participated in this study. The results confirm significant differences in the influence of micro environment factors on pricing strategy. Furthermore, the results show that the hospitals might benefit further by placing more emphasis on an integrated pricing strategy and recognising the micro environment influences on their hospitals. The results also highlight several implications for future research in health services marketing and fill in several gaps in the existing literature on health services marketing.

Keywords: Micro environment, pricing strategy, KSA.

1. INTRODUCTION

Today's business environment is characterized by rapid change, knowledge explosion, technological advancement, and intense competition (Cummings, 1990). Some theorists are calling for major changes in the way service organizations as well as manufacturing organizations function (Handy, 1990; Snow et al, 1992). The environmental turbulence that has been created by health care reform and enhanced competitive pressures of the marketplace has resulted in hospital executives attempting to aggressively formulate and implement strategies that are most closely tied to their hospitals' distinctive competences and the executives' perception of their external enviromnent. What strategies will ultimately be most effective in the future is still undecided. Hospital executives face a myriad challenges ranging from higher patient expectations to lower costs and possibly a restructuring of the total health care system due to the changing economics of health care (Green, et al, 1995; Yezdi et al, 1997; Ahmad, 2007). Micro enviromnents are changing at an accelerating pace, leading to a high level of uncertainty. This growing uncertainty is the result of greater customer expectations, the dilution of borders between micro enviromnents, and the move towards global competition. As the level of dynamics in business environments increases, the development of strategies that will differentiate the organization from its competitors becomes the key success factor. Consequently, the study of parameters affecting the process of strategy development has become the leading focus of industrialists and researchers (Feurer et ' al, 1996; Ahmad. 2012). The micro environment includes those elements or groups that directly affect, and are affected by, an organization's major operations. A micro enviromnent is often referred to as the industry in which the organization operates (Wheelen and Hunger, 2002). Studying competitive environment factors is an important issue in terms of the increased pressure placed upon hospitals and the competition that exists between hospitals. …

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