Discuss the Financial Resource Implications of Expansion, Contraction, and Maintenance

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The Answer is Expansion and maintenance of scope strategies frequently make it necessary for health care organizations to enter the capital market or make arrangements to borrow money from one or more financial institutions. Expansion of scope, such as market development, may be realized through acquisition of a competitor and involve large amounts of money. Expansion carried out through cooperation strategies similarly may require additional financial resources. For example, joint ventures are often financed by attracting other individuals, such as physicians, to invest in promising ideas or equipment along with the hospital. Organizations with sufficient financial resources may even act as venture capitalists for new ideas. Similarly, maintenance of scope strategies directed toward enhancement of facilities, equipment, quality of services, and so on will often require new capital and operating funds. For example, an organization may have to acquire new property and relocate in its efforts to change the image held by physicians who might join its staff and the patients who might use its facilities. New technology may be demanded as well for this change in image or for significant improvement of services. Contraction of scope strategies require equally challenging financial decision making. Divestiture, liquidation, harvesting, and, in some cases, retrenchment all convert financial resources, at least temporarily, into cash or near-cash assets. An inflow of cash forces strategic managers to consider alternatives for the funds to ensure that they are appropriately invested until they are needed for other uses. Contraction requires careful re- evaluation and possible redirection of the use of financial resources. For example, a hospital experiencing financial distress, after careful analysis, might decide that its emergency room is too expensive to continue to operate in view of limited demand by the community. The high level of specialized staffing for around-the-clock operations is a financial burden that cannot be justified economically. The decision to close the emergency room would temporarily free financial resources that could be allocated to more profitable areas and relieve some of the cost pressure on the hospital

Discuss the Financial Resource Implications of Expansion, Contraction, and Maintenance

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