Blog 8 - Polanyi’s Paradox

 Blog 8- Polanyi's Paradox 

In our final week of Business Perspectives, week 8, we learned of Polanyi's Paradox.  Polanyi’s Paradox, named after Michael Paradox, is the theory that, as humans, what we conceive regarding the capacity of the world is far beyond our comprehension (Polanyi's Paradox, 2022). The basic idea behind the theory is that there is so much we instinctively know, yet we cannot explain how we know it. It was in the book “Polanyi's Paradox and the Shape of Employment Growth” that author David Autor coined the theory, adding that "we can know more than we can tell" (Autor, 2014, para. 1). What he refers to is tacit knowledge. Tacit knowledge is information that we unknowingly adopt from experiences and stems mainly from implicit learning. Jasvin Bhasin (2023) explains this as knowing how to balance on a bike but not fully knowing the physics behind balance (Bhasin, 2023).

Is Polanyi’s Paradox a guarantee that AI cannot surpass human ability in the workforce? In the world of AI, David Autor (2022) argues that Polanyi’s Paradox is the very thing that hinders algorithms that try to replace human laborers. Activities are “ever-changing” and “unstructured”, which “presents intimidating challenges for automation” (Polanyi's Paradox, 2022, para. 8). What can be said by this is that AI can only be programmed to anticipate scenarios it has been given, but it cannot intuitively learn to function or determine reactions. In a world striving to implement AI, this paradox will pose a significant challenge.

There are those, however, who argue that AI technologies have surpassed the inhibitions of the paradox and is able to anticipate at a human level. Judgment is being built into AI to enable tacit learning, which helps overcome this hurdle. Proof of this was displayed when a program called AlphaGO, developed by DeepMind, was able to defeat one of the world’s top players in the game Go four times (Polanyi's Paradox, 2022).

What does this mean for employment? Tom Morris (2015) references David Autor, stating, “While workplace technologies may substitute for labor, any labor that cannot be substituted—and there are many examples—is generally complemented by technology (Autor, 2015). To date, this technology has been reserved for blue-collar work in the form of automation. Still, AI is becoming increasingly intelligent and infiltrating white-collar jobs through data analysis, financial reporting, and repetitive administrative tasks. The argument appears to persist over whether AI will be able to surpass the innate human abilities of “experiences, beliefs, and empathy” (Morrison, 2025, para. 10).

AI is just beginning to be integrated into the hospital setting for utilization review and securing payments from commercial payers.  Several programs, such as InterQual, Xsolis, and MCG, are attempting to emerge as a new way to fight denials and automate authorizations regarding medical necessity for status determination.  Currently, one of our sister hospitals has purchased this program. I am excited to see how AI can impact denials by utilizing predictive analytics to attempt to secure full financial reimbursement.  I am skeptical to this process but interested to observe. 

 

References

Autor, D. (2014). Polanyi's paradox and the shape of employment growth [Working Paper Series]. https://www.nber.org/system/files/working_papers/w20485/w20485.pdf

Autor, D. H. (2015). Why are there still so many jobs? The history and future of workplace automation. Journal of Economic Perspectives, 29(3). Retrieved July 21, 2025, from https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.29.3.3

Bhasin, J. (2023, September 3). What makes us human: The AI challenge to Polanyi's Paradox. Medium. Retrieved July 21, 2025, from https://medium.com/@jasvinbhasin/what-makes-us-human-the-ai-challenge-to-polanyis-paradox-cba5083c702b

Morrison, T. (2025, May 22). To fear or not to fear: AI and the future of work. MTI. Retrieved July 21, 2025, from https://www.heattreat.net/news/to-fear-or-not-to-fear-ai-and-the-future-of-work

Polanyi's Paradox. (2022, November 2). Scholarly Community Encyclopedia. Retrieved July 21, 2025, from https://encyclopedia.pub/entry/32479

Blog 7: Operation and Supply Chain Management

 Blog 7

Operation and Supply Chain Management

This week in Business Perspective 501A, week 7, we focused on supply chain management and operations management.  Operations management is internal, producing goods (tangible) and services (intangible).  We learned that many businesses offer a mix of both goods and services, like restaurants.  These businesses typically have higher customer interaction and thus greater variability in output, for example, in quality control (Tilles, 2025).  In operations management, decision-making can be defined in terms of the short term versus the long term.  Short-term decision making involves system operations and day-to-day tasks, such as inventory management, scheduling, and ensuring the day runs smoothly.  However, the long-term operations management involves system design.  This can be more extensive, including location, ensuring appropriate assets are acquired (Tilles, 2025).  Lastly, we learned about competitive priorities in operations management, including cost (production/delivery expenses), quality (products/services), flexibility (modifying to meet customer needs), and speed (delivery of products and services) (Tilles, 2025).  Together, this makes up the basis of operations management and how a company internally plans and manages the goods/services.   

Supply chain management is separate but works in tandem with operations management. The supply chain encompasses the entire organization and activities involved in producing, delivering the product, and serving the customer (Stevenson, 2025). Supply chain management can reduce storage costs/inventory, increase productivity, and enhance profit through improved integration with partner companies (Stevenson, 2025).

An article in the Wall Street Journal by Shih (2022) defines the supply chain and how the “supply chains can break down under stress and the more complex they are, the more likely they are to have problems” (Shih, 2022, Figure 1).  The article summarizes seven key principles of a supply chain.

1.      Complex Networks: linking supply chain to consumers from production to distribution.  This process is vast, often involving thousands of parts and multiple tiers of suppliers (Shih, 2022).

2.      Bullwhip Effect: sudden spikes in demand can be misconstrued as long-term trends, causing overordering in inventory and inventory swings leading to increased demand signals and inventory (Shih, 2022).

3.      Just-in-Time Production: Designed to reduce waste and lessen inventory costs through communication (Shih, 2022).

4.      Overordering Worsens Shortages: overordering to avoid losing market share will result in a surplus of inventory and then financial strain for the company (Shih, 2022).

5.      Long Chains are Fragile: The longer the supply chain the more vulnerable to delays (Shih, 2022).

6.      Congestion Reduces Capacity: More ships and containers does not mean faster delivery, ports can slow and bottleneck transit (Shih, 2022).

7.      Limited Visibility: Most companies have difficulty with an internal view. Unable to view beyond their immediate suppliers (Shih, 2022).

This article ties key concepts from week 7, outlining the supply chain in a defined sequence of steps. The article reinforces the delicacy and interconnectedness of the supply chain, as each step is completed to ensure that the next step can proceed. 

References

Shih, W. (2022). Seven Things You Should Know to Understand the Supply Chain. Wall Street Journal. Retrieved July 19, 2025, from https://www.wsj.com/business/logistics/what-to-know-supply-chain-11658152794?gaa_at=eafs&gaa_n=ASWzDAjr34sZEaR5x1n2asbQqnFH3_Dc8_dmMcolDuqprsZGGEx2CFxIhmjj6ltflFI%3D&gaa_ts=687c41d5&gaa_sig=HEbHCyiH1YzTUYaqMohZ7wCK3DZBDviHm4eIKb8KzrD24P-JFcIbSYE91ABz0h8MhM6cvBZ1heRKf5HOt9CgKw%3D%3D

Stevenson, W. (2025, July). Supply chain management [PowerPoint]. University of Illinois Springfield. https://uispringfield.instructure.com/courses/17974/files/2548878/download?download_frd=1

Tilles, O. (2025, July). Operations management Bus 501 [PowerPoint]. University of Illinois Springfield. https://uispringfield.instructure.com/courses/17974/files/2548867/download?download_frd=1

 

 

Blog 6: Finance Applications

 Blog 6: Finance Applications

                In week six of Business Perspectives, we focused on financial applications in the context of business decision-making. One of the areas of focus was identifying relevant cash flows, learning how to determine cash flows concerning capital investments, and inflation.  Another area of focus was evaluating operating cash flow. We were able to make financial calculations to understand the project's financial visibility.  Overall, this week laid the foundation for me in terms of finance applications to real-world business scenarios, particularly in relation to investment decisions. 

                The Wall Street Journal published an article that asserts “cash flow is a critical indicator of a company’s current health as well as its future. Free cash flow—the amount left over after commitments to capital expenses, employees and other obligations are met—are often directly tied to a company’s ability to grow, compete and attract new investors” (Improving Cash Flow Process Can Bring Surprising Benefits, 2025, para. 1).  A second article published in the Wall Street Journal mirrors this message, stating, “while there are several strategies organizations can deploy to buffer their business against uncertainty, improving cash flow forecasting can be particularly effective (Why an Emphasis on Cash Flow Forecasting Remains Critical, 2025, para. 1).  When cash flow is improved, it can lead to improved efficiencies and a competitive edge.  The pandemic emphasized the significance of cash flow forecasting.  Many companies had to quickly obtain cash reserves due to an abrupt drop in revenue.  This has put a spotlight on forecasting cash flows (Why an Emphasis on Cash Flow Forecasting Remains Critical, 2025).  “It is important from a governance perspective to have a formalized approach in which cash and liquidity levels are discussed with key stakeholders so decision-makers can analyze and understand the trends and drivers of cash—a critical prerequisite to forecasting and managing cash” (Why an Emphasis on Cash Flow Forecasting Remains Critical, 2025, para. 6).

“Most companies don’t develop a working-capital strategy and unknowingly squander many opportunities to improve their use of working capital” (Improving Cash Flow Process Can Bring Surprising Benefits, 2025, para. 4).  The article referenced an indirect vs direct method to evaluate cash flow forecasting.  The indirect method utilizes the profit and loss statement and the balance sheet.  This method adjusts net income by reviewing working capital to estimate cash flow. This method lacks detail and may not accurately predict future cash flow (Why an Emphasis on Cash Flow Forecasting Remains Critical, 2025). The direct method appears to give a more detailed view of cash flow, looking at ground-up transactions (Why an Emphasis on Cash Flow Forecasting Remains Critical, 2025).

We learned in week 6 about cash flows and how to estimate operational cash flows (OCF).  OCF = EBIT (earnings before income taxes) – Taxes + Depreciation. (The McGraw-Hill Companies, 2008).  We also learned of other methods for calculating operational cash flows that were parallel to the article, including Bottom-Up and Top-Down approaches: Bottom-up approach (OCF – NI + Depreciation), the top-down approach (OCF = Sales – Costs – Taxes), and the tax shied approach (OCF = (sales – Costs)(1-T) + (Depreciation * T)) (The McGraw-Hill Companies, 2008, PP slide 22 section).

In summary, we learned that cash flow refers to the movement of money in and out of a business (Understanding Cash Flow: A Key to Financial Stability, 2024).  We learned that accounting income includes non-cash items like depreciation.  I enjoyed the slides covering depreciation: “Consider depreciation expense.  You never write a check made out to depreciation” (The McGraw-Hill Companies, 2008, PP slide 5 section).  When evaluating a project, the goal is to convert accounting figures into cash flows.  “Much of the work in evaluating a project lies in taking accounting numbers and generating cash flows” (The McGraw-Hill Companies, 2008, PP slide 5 section).  Ultimately, we learned to make a viable financial decision; it is essential to focus on actual cash flow.

 

References

Improving cash flow process can bring surprising benefits. (2025, June 9). Wall Street Journal. Retrieved July 9, 2025, from https://partners.wsj.com/keybank/doing-more-with-more/improving-cash-flow-process-can-bring-surprising-benefits/?gaa_at=eafs&gaa_n=ASWzDAgiLf_BqsLYTp2CvgTTIwypZ9lK7ij-vh3tFQbvu1dSPZeQNSLOlujECTvYKRI%3D&gaa_ts=686e793c&gaa_sig=JQdbzbh-K4P4GBytEzAMwX7ISh4HM8bvk3wA4dHKl81JI2plC5OmituQta2Vr84MID0A0uLbcGJVf1kp18bx3Q%3D%3D

The McGraw-Hill Companies. (2008). Making capital investment decisions [BUS 501, Dr. Tilles, PowerPoint MOD 6]. https://uispringfield.instructure.com/courses/17974/pages/module-6-lecture-materials-npv-capital-investment-decisions?module_item_id=841570

Understanding Cash Flow: A Key to Financial Stability. (2024, April 17). richdelivery. Retrieved July 12, 2025, from https://richdelivery.com/understanding-cash-flow-a-key-to-financial-stability

Why an emphasis on cash flow forecasting remains critical. (2025). CFO Journal. Retrieved July 9, 2025, from https://deloitte.wsj.com/cfo/why-an-emphasis-on-cash-flow-forecasting-remains-critical-01675711952?gaa_at=eafs&gaa_n=ASWzDAi6PGu3A-e_jxjdGe2e0fu0ua21Z5xpOSGcT4rH7VDsR3nCQCnTIZhJtRT4cS0%3D&gaa_ts=686e793c&gaa_sig=dQEnvNQ-VPNLmEbeml7bgkbSX5t7zZiWkhHsgdUMUt5y-V1GbsoowrVXrZyQfkSe84XBFXkEAgx4Ff7zl6we-w%3D%3D

 

 

Blog Post 5: Fundamentals of Finance

 Blog Post 5

Fundamentals of Finance

During week 5 in Business Perspectives, we focused on the fundamentals of finance.  A significant portion of this week was spent projecting financial statements.  In the YouTube lecture, Houston (2020) asks, “What questions do we face in finance? How do we maximize wealth, what projects should we invest? How do we raise funds?” (Houston, 2020, 0:2).  Inversely, financial executives need to think of how to mitigate risks.  These questions are relevant to all firms, regardless of their size.   “One of the roles of the financial managers in the firm is to determine the appropriate allocation of money to various projects, investments, and accounts” (Houston, 2020, 0:17).  In the Wall Street Journal Article, Boughton (2025) stated, “financial executives are stressing the importance of a steady hand in the C-suite and a clear eyed view of business risks as their companies confront a thicket of unknowns on tariffs and other policy changes under the Trump administration” (Broughton et al., 2025, para. 1).  We learned in lecture, “the top financial manager within a firm is usually the chief financial officer (CFO), this role is similar to treasurer and controller” (Houston, 2020, 8:45).  CFOs and finance teams are viewed as experts and trusted to ensure the stability of the business's financial outcome, particularly in light of the uncertainty surrounding the multitude of tariffs.  Significant work is being done on the backend, focusing on predicting tariffs and the consequences across supply chain management and risk planning.   

The financial team attempts to prepare for the unknown certainty by increasing risk planning and proceeding with caution due to the unpredictability of the tariffs.  “Finance chiefs said they were wrestling with whether to take action now to offset tariffs-for instance, diversifying supply chains, working with suppliers to trim costs or passing through higher prices to consumers” (Broughton et al., 2025, para. 6).  We learned from module 4 there are several ways companies can pass on prices to their customers without the customers knowledge.  This would include unbundling services, shrinkflation, deals, memberships, and higher quality goods.  (Dholakia, 2021).  

We learned in lecture that financial decisions must be made regarding capital budget, long-term investments, capital structure, and capital management (Houston, 2020).  The finance team will make financial projections. “You want to be very methodical, very thoughtful in how you change direction (Broughton et al., 2025, para. 13). The CFO may need to slow financial management decisions, including mergers and acquisitions, and the capital budget and structure. CFO cannot afford to be distracted, “focusing on what is going to drive the business forward” (Dholakia, 2021, para. 8) and being transparent with factors out of scope to board members. 

On a personal note, my husband works for a Fortune 500 company within the financial sector.  One of his prominent roles is predicting the outcomes of the tariffs.  He has made numerous projections and intensified risk planning, often working through sleepless nights to anticipate the next move and ensure the company's financial security.   

 

References

Broughton, K., Maurer, M., & Williams, J. (2025, March 6). Finance executives seek stability amid erratic tariff shifts. Wall Street Journal. Retrieved July 1, 2025, from https://www.wsj.com/articles/finance-executives-seek-stability-amid-erratic-tariff-shifts-6d0ddd90?gaa_at=eafs&gaa_n=ASWzDAgOVlKWIcvM4Kn_zj81n7Un0xeUXE3P_2Tv1KzeY5hB0M3aidvAh-WoQek80Vg%3D&gaa_ts=68646981&gaa_sig=csW812UdqFReAa0_sCRMGY8kRvxMwHnLzXff5Pt3rMnk0Gs8PKwJkNh5LvbJh0rOXuMrplUM0elBZ0rw9GuN-A%3D%3D

Dholakia, U. (2021, November 21). How companies raise prices without raising prices. Wall Street Journal. Retrieved June 24, 2025, from https://www.wsj.com/business/retail/how-companies-raise-prices-without-raising-prices-11637490602?gaa_at=eafs&gaa_n=ASWzDAh7TyCs7N11ENxfEY2t-5025UNZ3IJULsOAJ9igMyEvFl11o18jkueceCZ2R8w%3D&gaa_ts=685abb5d&gaa_sig=HzAvWzwe4LxN-KZ77Soa2CHn236vmcgwpjTLJp-KwOtva3qIjKjoFGM7n69VdGFZzcBoo7hNl1gJpk3WtSzksw%3D%3D

Houston [Reza]. (2020). Chapter 1 part 1: What is finance? [Video]. https://www.youtube.com/watch?v=nG8seDzxT_w

 

 

Blog 4, Module 4: Marketing

Blog 4, Module 4: Marketing

Marketing in one word is: complex.  According to Dholkia (2021), in a journal published in the Wall Street Journal, “raising prices but keeping them the same holds the key to a successful price increase” (Dholakia, 2021).  Customers are more educated than before with more choices to choose from.  If prices increase too high, sales will decline; inversely, decrease prices and sales will increase.  This was a concept we acquired through the analysis of the demand curve in our prior MBA class, ACC505.  In module 4, we learned of price’s role in the marketing mix.  Dhruv (2008) states, “price is the only marketing mix element that generates revenue and is ranked as one of the most important factors in purchase decisions” (Dhruv Grewal & Levy, 2008). “The holy grail of pricing strategy is in finding ways to circumvent this seemingly ironclad economic claw, to raise prices without losing sales” (Dholakia, 2021).

According to Dholkia (2021), in How Companies Raise Prices without Raising Prices a journal article published in the Wall Street Journal, there are several common ways companies secretly raise prices (Dholakia, 2021).

1.      Unbundling services, lowering product quality and devaluing reward programs. (Dholakia, 2021).

One example from the article is that airline tickets are almost the same price as they were over 20 years ago, which might be because services have been unbundled. The customer pays per item. When I think of this, Spirit Airlines comes to mind; there are extra charges for every little thing, from baggage to boarding to seat selection.  The quality and value of the plane rides are far less than they were 20 years ago.  In Module 4, we learned about the substitution effect: in this case, if competitors are not also using unbundling, customers are likely to switch to a substitute purchase and move to a competitor.  

2.      Shrinkflation and the quantity surcharge (Dholakia, 2021).

 All shoppers are familiar with this; you feel you are getting a good deal from the packaging, but then you open the package and find that there is little quantity in it.  On the opposite spectrum is the family, party, or jumbo size.  People often believe that a larger quantity will be cheaper. “Brands routinely exploit this common customer belief by marking up larger packages more, and earning a greater margin on them” (Dholakia, 2021).  Grocers will also pick and choose which brands to sell, related to higher profit margins, and place the goods in a premium location with high visibility, and vice versa for lower profit margin brands.  Moving goods to higher visibility aligns with the 5Cs of pricing.  The customer reviews the cost versus the competition and perceives they are receiving a good value.  The company’s goal is to maximize profit. 

3.      Disappearing deals and coupons (Dholakia, 2021).

Everyone loves a good deal, especially when it comes to promotions.  “Incentives such as buy one, get one, and free shipping are common in many industries” (Dholakia, 2021).  When there is a promotion, the price paid by the consumer is less; thus, the company must find a way to raise the cost due to the promotional deal. 

4.      The sunk costs of memberships (Dholakia, 2021).

People swear by the big-box stores, such as Costco and Sam's.  They have loyalty to it, driven by a strong belief that the big-box membership store provides better value.    One must remember that with this value, you are also paying membership fees.  “Membership fee camouflages the actual price paid by customers” (Dholakia, 2021).

5.      From good to better and from better to best (Dholakia, 2021).

Another way companies discreetly increase prices is with higher-quality goods sold at higher profit margins.  Companies will keep their popular items competitively priced or lower prices to boost demand, then adjust their premium products to increase profit margins.  “Prestige pricing - a pricing strategy in which prices are set at a high level, recognizing that lower prices will inhibit sales rather than encourage them and that buyers will associate a high price for the product with superior quality; also called Image Pricing” (Prestige Pricing, 2025).  This can be demonstrated in the demand curve, having an upward sloping curve (Dhruv Grewal & Levy, 2008).

 

References

Dholakia, U. (2021, November 21). How companies raise prices without raising prices. Wall Street Journal. Retrieved June 24, 2025, from https://www.wsj.com/business/retail/how-companies-raise-prices-without-raising-prices-11637490602?gaa_at=eafs&gaa_n=ASWzDAh7TyCs7N11ENxfEY2t-5025UNZ3IJULsOAJ9igMyEvFl11o18jkueceCZ2R8w%3D&gaa_ts=685abb5d&gaa_sig=HzAvWzwe4LxN-KZ77Soa2CHn236vmcgwpjTLJp-KwOtva3qIjKjoFGM7n69VdGFZzcBoo7hNl1gJpk3WtSzksw%3D%3D

Dhruv Grewal & Levy, M. (2008). Pricing - slides (BUS 501, University of Illinois Springfield) [PowerPoint]. https://uispringfield.instructure.com/courses/17974/pages/module-4-applying-marketing-fundamentals?module_item_id=841558

Prestige pricing. (2025). Monash University. Retrieved June 24, 2025, from https://www.monash.edu/business/marketing/marketing-dictionary/p/prestige-pricing

 

Blog Post 3, Module 3: Segmentation

 Blog Post 3, Module 3: Segmentation

During week three of my MBA class, Business Perspectives 501A, we focused on marketing fundamentals.  We learned of the four Ps in marketing: Product, Price, Place, and Promotion.  We defined product as a good, a service, or both.  This includes the design, quality, branding, and packaging.  The price is what the customer pays for the product.  This is not as straightforward as I imagined; it also includes the perceived value.  A place is where you go to obtain a good or service.  Finally, promotion was defined as the communication of the good through marketing. (Villegas, 2024).  The 4Ps must be aligned to have a strong marketing campaign. When aligned, you maximize value for both the company and the customer.

We also learned the significance of market segmentation.  According to the article, Modern Customer Segmentation in the Wall Street Journal, “marketers have the power to make much more dynamic segmentation decisions, fine-tuning their tactics with greater precision in near real-time” with integration of AI (Dijols & Van Tilburg, 2024).  “In the past, customer segmentation was often retrospective. Using historical trends, marketers identified discrete audiences of customers, developed and executed strategies to reach those groups, and then assessed their effectiveness once campaigns were complete”(Dijols & Van Tilburg, 2024).  The article goes on to say that customer segmentation needs to follow five tactics:

1.       Identify strategic gaps to align with current business goals.

2.       Combine quantitative and qualitative data to validate customer hypotheses.

3.       Utilize data science tools to identify valuable customer segments.

4.       Add context to understand motivations.

5.       Activate segments and adjust based on AI.

AI is being harnessed to apply real-time feedback with precision to segment into precise marketing groups.  “Gone are the days of siloed data scientists. Now, modern technologies can help marketers quickly test and refine their hypotheses. Using machine learning and AI, marketers can interrogate customer data to discover patterns and nuances much faster and with greater precision than humans”(Dijols & Van Tilburg, 2024).   AI allows for an in-depth analysis of customer data, but should always be evaluated to understand the motivation of customer behavior.  AI can help companies stay competitive by efficiently anticipating needs and bridging consumer gaps.  By integrating the five tactics described, marketing can have a predictive approach using AI to assist.  “Adopting a real-time, predictive approach to segmentation can allow marketers to stay agile and determine where customers may be headed” (Dijols & Van Tilburg, 2024).

Although I do not have any marketing experience, I can say that I have had much experience as a consumer.  We learned in lecture about the customer-oriented company focusing on customer orientation (decisions based on a deep understanding of customer preferences). Rather than just selling a good, the company understands what the consumer needs.  The customer-oriented company embraces empowered customers (the customer is knowledgeable of the product).  Lastly, there is value to all stakeholders (beyond the customer and company, extending to the environment and society). (Villegas, 2024).

An example that comes to mind when I think of a customer-oriented company is Starbucks. Starbucks is highly customer-focused, creating an engaging experience centered around coffee. They possess a deep understanding of their clients through segmentation. They have loyalty rewards, offer customization of their product, and various ways to easily obtain their product for the customer.  Their customers are empowered; they know their coffee preferences and place their orders through mobile apps. Finally, Starbucks focuses on value for all stakeholders. They provide rewarding employment benefits.  According to a journal post from the Wall Street Journal, Starbucks Chief Executive, Brian Nicocol, “seeks to boost sales by focusing on coffee offerings and café hospitality, while trying to improve service” (Haddon, 2025).  I hate to admit it, but I am a frequent flier of Starbucks as a customer.  I have their app and frequently order my coffee of choice.  I choose Starbucks for all the reasons listed above, as a customer-oriented company, it is more than a coffee; it is an experience with my coffee and a feeling I get when drinking my coffee. This is what the company seeks. 

 

References

Dijols, F., & Van Tilburg, S. (2024). Modern customer segmentation: more dynamic, personalized. Wall Street Journal. Retrieved June 16, 2025, from https://deloitte.wsj.com/cmo/modern-customer-segmentation-more-dynamic-personalized-a3eba574?gaa_at=eafs&gaa_n=ASWzDAgUqK-2RHlTXLU3Lg0Z0Wihd5KpNuvW67V3EOXmAWIdglRIYL2VVm6Jy_BgItg%3D&gaa_ts=685075a8&gaa_sig=MazXfiiW0ihhHzIdf5v8hi_myFn7ORg34kD7aPv4kA_EMHV8aK0Pxluw_bmyk2BKxoIMFp7Y0LzfmEbZTB2Q9w%3D%3D

Haddon, H. (2025, June 11). Howard Schultz backs tarbucks ceo rian niccol's turnaround approach. Wall Street Journal. Retrieved June 16, 2025, from https://www.wsj.com/business/hospitality/howard-schultz-backs-starbucks-ceo-brian-niccols-turnaround-approach-1b5ffe0a?gaa_at=eafs&gaa_n=ASWzDAiB3_M4P4K3PaDe-o-RNQEDPttCGR9tqWIAjXVMK-1yNiZ3RfMvtbwRg8C2U5Q%3D&gaa_ts=6850d2eb&gaa_sig=HUxHdY4zbIDEbPC_qj0QKLxj4oEtcRsexkrsRD1TTywfAb4Rye7s30GI0J1NISOVDl_SAJsfd_9kAOmD1jrWLA%3D%3D

Villegas, J. (2024, October 1). What is marketing? [Video]. YouTube. https://www.youtube.com/watch?v=O1hMzG_X1mM

 

 

Module 2- Business Perspectives 501A - Porter's Five forces and Healthcare

Module 2- Business Perspectives 501A

           During week 2 of Business Perspectives 501A/Module 2, we focused on concepts regarding the external and industry environments and how to analyze the industry. We learned that the general environment is uncontrollable (how a society impacts a company, typically future-focused).  External analysis focuses on the firm's core competencies to enhance and achieve goals.  Competitor analysis looks at competitors and future companies, including rival behavior strategies.  Finally, we focused mainly on the industry environment and how this looks at direct influences on a firm (Porter’s Five Forces).   When a firm can master general, industry, and competitor analysis, the firm should be operating at top performance. 

            One type of framework used in analyzing a firm is Porter’s Five Forces.  “Michael E. Porter’s Five Forces framework is one of the most widely regarded business strategy tools. This framework offers organizations a systematic approach to assessing their competitive environment and making strategic decisions that can influence their long-term success” (Danao, 2024).  

What are Porter’s Five Forces?

1.      Competitive Rivalry

2.      Supplier Power

3.      Buyer Power

4.      Threat of Substitution

5.      Threat of New Entrants

 

            Competitive Rivalry is concerned with the intensity of the competition, focusing on competitors.  Within this phase, one can review competitive firms, analyzing competitors' products, including product differentiation and price points. The growth of the industry should also be considered.  “Rivalry competition is higher when only a few businesses sell a product, the industry is growing, and consumers can switch to a competitor” (Marin, 2023). When reviewing competitive rivalry, profitability can be analyzed.  Typically, when you have higher rivalry, one tends to have lower profit margins due to price competition. When analyzing other firms in the context of competitive rivalry, you can then take the feedback back to the company to differentiate your products, find a niche market, and build brand loyalty. 

            Supplier Power reviews the supplier's ability to influence prices, contracts/terms, and quality in the industry.  When there are fewer suppliers and the supplies are specialized or niche, the supplier tends to have greater influence.  This would also be true if it were costly for the firm to switch suppliers.  When the suppliers have higher influence, they can negotiate higher prices, better terms for themselves, and even adjust quality without much say from the firm.  The firm would need to be cautious and develop partnerships with the supplier or attempt to diversify suppliers.  “Finding reliable suppliers and securing favorable terms is vital to success” (Danao, 2024).

            Buyer Power defines the ability of the customer to influence pricing and quality, making firms compete for their business.  When there are fewer buyers for a product, buyer power tends to be high, as the buyer is typically well informed and knowledgeable about that product.  Buyer power is also high if the products are easily substituted.  “The electronics industry provides a compelling example of buyer power. Price comparisons are easily accessible online, so finding the best deals and discounts is easy” (Danao, 2024).   When buyer power is high, typically prices for the product are lower, and the customer can demand better quality.  Again, if the firm is looking to lower buyer power, they would need to differentiate their product, find a niche market, and build brand loyalty, just as in competitive rivalry, to avoid being forced to accept the lower profit margins.

            Threat of Substitution looks at the risk of losing customers to substitute/similar products.  The threat of substitution is highest when the substitute good is a lower price, better quality, or easier to obtain for the consumer.  When the substitution risk is higher, profit margins tend to be lower for companies as the demand is reduced. “Threat of substitution examines the number of competitors, how their prices and quality compare with the business being examined, and how much of a profit those competitors are earning, which, in turn, would determine if they can lower their costs even more” (Marin, 2023).   The company would need to combat the substitute by adjusting their product to consumer demands, adjusting pricing, or again differentiating the good. 

    Threat of New Entrants defines how easy it is for new companies to enter and fully join the industry.  Established companies would see new companies competing in the same market as a threat due to increased competition.  The increased competition would lead to decreased profit margins.  The threat of new entrants is higher when the entry barriers are low (start-up costs).  When customers have little to no brand loyalty, the threat of new entrants is also higher.  Online stores face a high threat of new entrants as it is “easy to set up an online store, meaning there’s a lower barrier to entry in the retail sector. Platforms such as Shopify allow new small businesses to attract customers and establish themselves quickly” (Danao, 2024).

            Porter’s Five Forces offers an analytical approach to reviewing the firm's competitive strategies.  Typically, one reviews a product-producing business; however, Porter’s Five Forces can also be utilized regarding healthcare.  I was pleased to find an article from the Wall Street Journal stating that Porter spent several years in the broken healthcare industry analyzing and reviewing.  He even wrote a book, “Redefining Health Care: Creating Value-Based Competition on Results” which I will look into. Porter’s analysis transitioned from the typical business world into the healthcare business world, helping to reshape the industry, focusing on value-based outcome measurements, encouraging competition based on quality metrics and results.

Porter found that the predominant issue with the focus of health care is the emphasis on volume rather than quality metrics.  He stated, “The real problem in health care is a lack of good information on quality and outcomes. And without that information, any effort to drive down costs through competition will backfire. People might try to save money by avoiding cost-effective drugs or preventive treatments, while spending money on costly but ineffective procedures. Price information without quality information just leaves us in the same mess we are in today," (Murray, 2006).  I found this quote to still be applicable today.  He argued that there needs to be publicly reported standard quality metrics and encouraged government regulations.  The journal states, “the problem is that without good measurement of those results, the system doesn't drive others to follow the industry leaders.  US healthcare competes on the wrong things” (Murray, 2006).  Porter stated that providers should compete to improve outcomes at a reduced cost.  He emphasized value-based competition around medical conditions.  Porter not only redefined the “typical” business world but also transformed the healthcare business as well. Pushing for measured quality outcomes at lower total costs rather than volume.  Essentially, this is a typical supply-driven model shifting to a patient-centered model.   The United States is currently utilizing this model today. 

            As a nurse manager over utilization review, I deal with overutilization of services, excess days, avoidable days, delays, inappropriate admissions, and denials every day. Porter's key concepts of value-based competition and measuring outcomes and costs are also part of my daily life. 

References

Danao, M. (2024). Porter's five forces: definition and how to use the model. Forbes. Retrieved June 10, 2025, from https://www.forbes.com/advisor/business/porters-five-forces/

Marin, M. (2023). How Porter's five forces can help small businesses analyze the competition. Business news Daily. Retrieved June 10, 2025, from https://www.businessnewsdaily.com/5446-porters-five-forces.html

Murray, A. (2006). Health-care fixes should focus on quality. Wall Street Journal. Retrieved June 11, 2025, from https://www.wsj.com/articles/SB113875374948661567?gaa_at=eafs&gaa_n=ASWzDAgvuhTk1RR3Wc0dovgRlHcUs8KdHfCgvYTloLwRlmuCnqZ20kBEBcMtFiC22wQ%3D&gaa_ts=684a2af6&gaa_sig=QxUwp_HWW19PRmaJhQ1wf4PSzwTffhXCMdGs1qGGBR2Xhc6dZggtF2KVQBvJJR6XX8KCaprDIJmtQm6fupueTg%3D%3D