Reference no: EM131375954

Zero sum competition is based on the concept of a winner and a loser in a business relationship. The cost shifting that Porter describes is an example of zero sum competition. For example – managed care gets paid for covered lives and reduces the amount that it pays physicians. Managed care is the winner (presumably having larger profits because its costs are less since it reduced what it pays the physician), the physician is the loser because the payment per patient visit is less, and the patient is also the loser since the physician must increase the volume of patients seen to maintain his/her income. Positive sum competition is based upon the concept that all parties in a business relationship feel like they are “winners.” The seller is a winner because they are getting paid; the buyer is a winner because they feel/perceive that what they are getting is of value to them, whether it’s a high quality car or high quality health care services. A key component of Porter’s thesis is that zero sum competition does not foster quality care, which is what patients value the most. Porter also related value, quality and price and if you think about it, it makes sense. When consumer believe that the quality is high caliber, they are usually willing to pay a higher price because the want the value. Consider the episodic shopper at Nordstrom’s. The episodic buyer is facing an event (wedding) where they need a higher quality garment, and are willing to pay a higher price to get that value. Porter then brings in the question of strategy – should an organization completely broadly (all segments of the market) or narrowly (select segments of the market), or somewhere in between. These are the key underlying concepts that Porter builds his argument for value based competition. Porter also builds an argument around value and quality that leads to lower health care costs. Based upon your readings, how does Value Based competition help an individual health care provider (i.e.: hospital, physician group practice, etc) create a competitive advantage advantage. This means using our definition of strategy – providing a service that is different from our competitors that brings value to our customers/patients. It also requires you to use all aspects of the material from the text book.