Jaime Hadley

Economic Business Analysis

Home Care Company A (hereafter, HCCA), a representation of a specific

company, operates in what would be called a Monopolistic Competition market

structure. The barriers to opening a home care company are relatively low,

made more so by the ability (and common method) of opening a local franchise

of a larger corporation. In Bella Vista (AR) alone, at least six companies provide

the same type of home care. Home care differs from home health care; home

care providers require little training (from 40 hours of federal mandated

training to a CNA certification), as opposed to home health, which employs

nurses, physical therapists, and doctors. A relative layman, with general

business knowledge, could run a successful homecare company. The initial

cost involved is relatively low for a business venture; HCCA has an initial

break-even point of about $200,000 (including franchise fees, licensing costs,

first year salaries, etc.) As in most monopolistic competition markets, the

driving factor behind profit for HCCA is differentiation: HCCA offers an almost

identical product, in an almost identical way as its six nearby competitors.

HCCA must find ways to distinguish its service from other providers in order to

gain more clients and maximize profits.

Internally, HCCA has several strengths and weaknesses that contribute to (and

detract from) success/profitability. HCCA is located in a high traffic area, with

great visibility. Every day numerous business people drive on the highway from

Bella Vista to Bentonville, and then commute back at the end of the day. HCCA

can be viewed from the road, and has an attractive building and informational

billboard. The nature of home care means that the person being advertised to

is not generally the person in need of the service. Home care companies must

build rapport with health care providers, such as hospitals and rehabilitation

facilities, and must be easily accessible to the family (and sometimes friends)

who identify the need for a loved one to receive care and typically provide or

orchestrate the payments. Therefore, the building and billboard (fixed costs)

are aimed at the right people, the generation still at work who are beginning to

face dilemmas with their aging parents.

HCCA’s internal weaknesses are personnel driven. Though the director has a

good amount of business knowledge, they do not have a healthcare or health

administration background. This can prove difficult when hiring individuals,

such as Certified Nursing Assistants. Without adequate information on what

an individual should know, it can be hard to weed out the less qualified

individuals. HCCA also has difficulty motivating employees. Home care

employees must have a certain level of personal motivation, the motivation to

enrich the lives of clients, not just fulfill duties. This can be hard to encourage

Jaime Hadley

and increase through typical corporate motivations. HCCA management must

work to find the motivational factors behind employees’ actions, such as

discussed by Dan Ariely. Employees must be shown that their work matters,

and that time and energy spent bettering themselves is appreciated and

rewarded.

As with any company, HCCA faces what are called Porter’s Five Forces: internal

competition, supplier and buyer powers, threat of substitute products, and

threat of new entrants. Existing firms may lower prices or offer somewhat

distinguished services, forcing HCCA to reevaluate or lose clients/profits.

Supplier power is not as strong for home care, as the “supplies” are mainly

limited to employees. Buyers have a relative amount of power, and area

demographics are a large determinant of price. Buyers can price match among

the similar firms, and rely heavily on word of mouth (which print and large

scale advertising are weak against.) With the barriers to entry being somewhat

low, the threat of new entrants is constant. In an area like Bella Vista, there is

a large aging population supported by relatively high incomes (retirement

savings or children in big business.) This type of situation attracts new

entrants. The operating costs of the business are relative to the amount of

business at the time, and the number of employees can be easily decreased

when business is slow. The threat of substitute products comes in the form of

health care companies or large hospitals offering home care as a byproduct of

other services. People using in-home nurses are more likely to use in-home

care from the same company if it is an option, for instance.

Home care can be described as an elastic product: as the price increases,

demand will decrease. The alternative to homecare is typically a family or friend

caregiver. If home care cannot be afforded, a family member will often step in

as best they can to offer care for an aging loved one. It is the responsibility of

the home care provider to keep costs equitable for the industry, and to educate

the public on the added benefits of home care over family caregiving.

When I was working for HCCA, I had several opportunities to “foster a culture

of success.” I hired and supervised the caregivers who were the representatives

of the company in homes. Though I did in some capacities, I could have

employed Yves Morieux’s rules to simplify work to enhance our employee’s

experiences and performance. I did my best to remove barriers and layers for

employees. I had an open door policy and was willing to provide flexibility when

necessary for employees. Something lacking in my work was casting a future

vision. In order to retain great employees, I could have done a better job to help

them visualize their role as the company grew, and to support them in their

commitment to the job.

Jaime Hadley