Because of the changes that have taken place in the nursing home industry throughout the past decade, service area competitor analyses have become an increasingly important aspect of environmental analysis. The process of service area competitor analysis involves first of all an identification of the service category for analysis. It then moves on to include identifying of competitors, determining the strengths and weaknesses of rivals, and anticipating their moves based on the analysis of the data collected.
The service area selected for this particular analysis is the Culver City nursing home industry. The market for nursing home care in Culver City, California is changing rapidly and has been considered a buyer’s market for specialty care. The population of Culver City in relation to the number of senior citizens is an important consideration in the decision to enter the nursing home market in this city. The number of persons each nursing home usually takes is in the range of 80 to 85% of its carrying capacity (Pandya, 2001).
One must not forget that “the demand for nursing home care [is] driven by the availability of financing” (Willging, 2003). Also notable is that approximately 36% of seniors have been financing nursing-home care out of pocket (2001). In carrying out a service area competitor analysis upon this city, it is necessary to take a look at such aspects as its financial and economic situation, the demographics, and the trends that might derive from them. It will also be necessary to assess the strategies being pursued by the nursing homes that service the area and the consumer reaction to these policies.
According to the analysis of the Culver City finance budget, the city began a period of economic growth in the late 1990’s where the property taxes began reflecting an increase in the value of real estate and overall taxes represented a general increase in per capita income. Over the period the city was able to sustain both low inflation and unemployment rates. Investment grew almost three fold, according to the Dow Jones Industrial, S & P 500, and the Nasdaq composite charts (City of Culver City, 485-86). However, economic growth has plateauxed since 2001, and the employment rate that had fallen from 9 to 3.
9 percent, has risen up to approximately six percent (485). Across the United States, the health care industry has had to cope with economic changes resulting from rising medical costs. The Culver City population sustained a growth of 47% between the years 1990 and 2000 (“City Population,” p. 2). The records of the Culver City Redevelopment Agency reveal that the population of the city is 39,119. On average, there are about 16,826 households represented in the area, and the income for the average household is about $76,013 per annum.
The income for the average family household amounts to $90,930. The Culver City trade area extends beyond this. If the area considered extends to a three mile radius beyond the hub of the city, the population increases 305,287 and boasts an average family income of $79,689. Within a five mile radius live about 852,147 people, and the inclusion of this population brings the average household income back up to $87,820. The median age of Culver City is 40, and 84% of all the adults of this city have attained at least a high school education.
Thirty five percent of these adults have also attained at least a bachelor’s degree in higher education. The population is distributed mainly among persons of Caucasian, Hispanic, African American and Asian origins. Forty-six percent of the inhabitants are white, 25% are Hispanic, 12% are Asian and another 12% are African American. The remaining 5% are of unknown or “other” origin (“Demographics”). In Culver City is a rather prosperous community. Only 2. 96% of the population earns less than $20,000 per year. Those who live on an amount between $20,000 and $50,000 amount to 13.
46% and another 22. 37% live within the next tier level, between $50,000 and $75,000. Seventeen percent live on $75,001 to $100,000, and a third of all the people live on an income higher than $100,000. Approximately 16% of the Culver City residents are over sixty years old (“Demographics”). For strategic management purposes it is dangerous to consider the over-65 group as a homogeneous one (Willging, 2003). Shifts in demographic and increases in lifespan have changed the make-up and the desires of the aging population (Ginter, et al. 2006, p. 6).
The senior citizens and retiree demographic in Culver City has been divided into three groups for the sake of consumer analysis. The retirement group has a median income of approximately $53,000 which is about $11,000 higher than the national average. Non-whites are represent about 43% of this group and approximately 35% of this group has attained a bachelor’s (or higher) degree. This group is likely on average to spend a mid-to-high amount on entertainment, but spends a bit lower on average on health care, presumably because not all retirees are senior citizens (Artsmarket, 2002, p.
12-13). The active senior singles group has a median income of $32,000, which is also higher than the national median. They participate in many health activities and have a medium-to-high likelihood of spending money on health. The portion of none whites in this group is approximately 22%, and 25. 7% percent of the members of the active senior singles group have attained college degrees (Artsmarket, 2002, p. 14-15). The prosperous older couples group has a median income of approximately $67,500, which is an astounding $32,000 higher than the national median.
Thirty percent of these have attained bachelor’s degrees (or higher) and people of color make up 29 % of the group. Their likelihood of spending on health care is in the high range (Artsmarket, 2002, p. 16-17). The city’s economic situation presents costs and benefits to any prospective nursing-home business venture. The fixed costs of entering the market would be considerable, but the increased unemployment rate (up from 3. 9 percent) would make the price of labor a little more affordable than in recent years.
A favorable thing for businesses is the tax rebate program that has been instituted by the city to encourage new business. This grants them tax relief from either business or utility users’ tax (“City of Culver City, 489). A new entrant into the nursing home industry in Culver City must consider the quality of care that is to be provided by that business entity. The general problems with funding being experienced by nursing homes across the country has led not just to many law suits and eventual bankruptcy, but to the loss of customers to competitors (Day, 2005).
Culver City customers also require not just a variety but quality of service. Variety will be an asset; however, as there is great intensity of rivalry among existing organizations, and the nursing home industry is experiencing rapid growth driven by the demographic and social trends mentioned above. It must be noted, for example, that a good portion of the seniors are educated, and “educated seniors tend to be more knowledgeable and have higher expectations of a facility” (Willging, 2003).
The significant portion of non-whites must also be considered and real attempts made to cater and appeal to them. In addition, it must be noted that a vast majority of these seniors have lived active lives; therefore, facilities which cater to this would be magnetic to their tastes. The competitors in the Culver City nursing home industry, though they provide adequate care and the necessary facilities, can be categorized into four groups that denote they quality of service they offer as well as the level of reimbursement that they require for those services.
For this service area nursing home facilities are pursuing four basic strategies: high price with highly specialized services (strategic group 1), low price with few ancillary services (strategic group 2), medium price with some services, (strategic group 3), and high price with many services (strategic group 4). Customers who seek the attributes of one strategic group, such as highly specialized rehabilitation services, are unlikely to be attracted to another strategic group.
A good idea for a newcomer in the nursing home market is to choose the group to which it is best able to cater, and possibly to diversify the scope of the service by offering one or two (not many) extra services. Then, concentrate on providing the best service possible in that group. Diversity does exist in the consumer groups, but this information must be acted upon with care. Early retirees, for example, who might need nursing home care, may not yet qualify for state or federal assisted care (Clinton, 1993). Medicare and Medicaid provide full coverage to only about 9% of seniors, and many are forced to pay out of pocket (Day, 2005).
The figures have shown that many Culver City seniors can afford this, but paying out of pocket means that the consumers will be even more unlikely to accept less than the best care. This look at the nursing home industry as it exists in Culver City has revealed that, though a “buyers’ market” exists and the competition is very high, a newcomer in the market might still have a chance to win a significant market share. This must be done by paying attention to the demographic as well as the economic situations that have the power to affect the market.
The psychographic and demographic aspects show that a diversity of services must be offered and that any newcomer desiring be successful in such a competitive and demanding market must be willing to (carefully) diversify.
ArtsMarket. (2002). City of Culver City: Acorn Cluster Lifestyles and Local Profiles. Bozeman: Author. www. artmarket. com City of Culver City. (2004). “Fiscal 2004-05 Adopted City Budget. ” Budget and Finance. Author. http://www. culvercity. org/citygov/budgetfinance/depts_budgfinanc. html “City Population. ” (2001). Redistricting Committee. Oregon State Legislature.
http://www. leg. state. or. us/comm/redistricting/citypop. pdf Clinton, Bill. (1993). Remarks and a question-and-answer session with the AARP on health care in Culver City, California. Weekly compilation of presidential documents. News and Society. http://www. findarticles. com/p/articles/mi_m2889/is_n40_v29/ai_14550594 Day, Thomas. (2005). “About Nursing Homes. ” Guide to long term care planning. National Care Planning Council. http://www. longtermcarelink. net/about_nursing_homes. html “Demographics. ” City of Culver City. http://www. culvercity. org Ginter, P. M. , Swayne, L. E. and Duncan, W.
J. (2006). Strategic management of health care organizations. 4th ed. Malden: Blackwell. Pandya, Sheel. “Nursing Homes. ” Policy and research for professionals in aging. AARP. http://www. aarp. org/research/longtermcare/nursinghomes/aresearch-import-669- FS10R. html Redevelopment Agency of Culver City. “Community Profile. ” City of Culver City. Culver City: Government. http://www. culvercity. org/citygov/redevelop/demogr. html Willging, Paul. R. (2003). “Don’t let demographics fool you. ” Nursing Homes. Aug. 2003. http://www. findarticles. com/p/articles/mi_m3830/is_8_52/ai_108198554
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