Description
In the summer of 2010, the members of the business development team of Target Systems were carefully considering the possibility of entering the Electronic Health Information (EHI) systems arena. The company had both breadth and depth of experience in providing logistics, project management and information technology (IT) services to clients in the public and private sector. Although the employees of Target Systems were experts in a full range of IT services, no one in the company had deep expertise about the way IT applications were being used to manage patient care or administer health care organizations. The lack of expertise implied that a movement by Target Systems into the EHI systems arena would call for the company to simultaneously develop new products and services for a new set of clients –– to engage in growth by related diversification. That strategy would stand in contrast to the growth by concentration strategy the team had employed throughout company history. To pursue a diversification strategy the team would have to decide if it should provide services to regional health information organizations, hospitals or individual physicians’ practices. It would also have to decide whether it would cultivate new capabilities by investing in internal development or by seeking a strategic partner that was already operating in the arena. Ultimately, the way the business development team weighed the opportunities versus the challenges of adopting a new growth strategy in the context of a still uncertain external environment would strongly influence its decision as to whether or not the company should enter this new arena.
Learning Objective
The case sheds light on a number of theoretical issues. It leads students to think hard about what constitutes a well-conceived corporate strategy. It reminds students there are multiple ways to assess the factors that make a company successful, while suggesting some aspects of the external environment may be more important to strategy formulation than others. The case also helps to illustrate the wide gap –– rather than the fine line –– that may exist between a corporate strategy of growth by concentration and growth by related diversification. In keeping with a growth by related diversification strategy, the case illuminates the different costs and benefits that might be associated with internal development; a strategic alliance or a joint venture; or a long-term contractual relationship.The case can be used in both undergraduate-level and graduate-level courses that deal with business strategy. It reveals both the internal strengths of Target Systems and features of a new external environment. The case enables the instructor and students to talk about the internal strengths of Target Systems. It provides insight about the company’s business level strategy and about its organizational culture. Additionally, it suggests there was a strong balance among the organizational culture, business strategy and the external environment in which Target operated. This case includes the authors’ interpretation of the company’s activity system and deals with a set of issues that typically fall into the categories of formulation and implementation of corporate strategy. The case can also be used in somewhat specialized courses about health care management or management of information technology at both the undergraduate-level and graduate-level as well.