Competitive advantage in the new social
care marketplace: a new theoretical
perspective
Patricia Dearnaley
Patricia Dearnaley is a
Managing Director, based at
East Training & Consultancy
Ltd, Bedford, UK.
Again, many thanks are due to
Robin Johnson for his support.
DOI 10.1108/HCS-12-2013-0025
Abstract
Purpose – Changes in the UK social care sector over the past 20 years have effected a fundamental shift in
commissioning and delivery relationships. This “quasi-market” challenges existing theory and models
around competitive advantage. This study, as outlined in two earlier articles, addressed weaknesses in the
defining framework for analysis and business planning in this new environment; the purpose of this
concluding paper is to propose a new perspective for those interested in entering this market.
Design/methodology/approach – The original research comprised a constructive research approach
through a single holistic case study, using qualitative research methods including document analysis,
interviews, secondary data, observations and facilitated meetings.
Findings – This final paper offers a structured framework of analysis and response: the External Drivers Model.
Research limitations/implications – The model was developed for a scenario impacting upon a social
housing agency, with ambitions to enter this market as a new provider; it may require further research to
establish its generalisability to other organisations and other sectors.
Originality/value – This series of three papers adds to existing knowledge by critiquing current business
models, and positing a potential development to existing contingency theory: the External Drivers Model.
The study has resulted in a number of outputs including an outline of tools to assist in using the model.
Keywords Competitive advantage, Contingency, Social care, Business planning, Marketization
Paper type Research paper
Introduction
The model presented in this, the third of three papers exploring the nature of the new social care
market, arose from work undertaken originally as part of a consultancy project commissioned a
medium sized social housing agency based in the Midlands, which we will call AHA. The author
was commissioned to project manage AHA’s entry into the domiciliary care sector (i.e. the supply
of personal care to older and vulnerable adults in non-institutional home settings) in late 2011.
Whilst the technicalities of managing government-regulated social care were established and
applicable, what was less clear was exactly how AHA should position its new business within
the local care market. This raised a number of generalisable questions:
How can a new entrant to the social care market prepare itself to compete most effectively with
existing suppliers?
What does it need to do to gain market presence, to ensure that it gains sufficient clients to achieve
financial viability as soon as possible?
It was clear that the applicability of well established theoretical models in evaluating and
planning for social care market success needed consideration. The first of the papers
in this trilogy outlined the peculiar nature of this new market for care, with a brief history of the
VOL. 17 NO. 1 2014, pp. 5-15, C Emerald Group Publishing Limited, ISSN 1460-8790 j HOUSING, CARE AND SUPPORT j PAGE 5
 evolution and size of social care, and the development of the delivery framework known as
New Public Management.
The second developed a critique of existing market analysis models, including competitive
advantage and contingency theory, which in their original form at least seem less well suited to
the peculiar nature of this new approach. The second paper critically analysed the key
assumptions and limitations of existing theoretical perspectives in the context of the new social
care market, not only to evaluate existing models, but to consider how a new approach may be
optimised to enable a more valid and practical basis for business planning in this very different
business environment.
Taken together, these papers indicated the need for a new framework for market analysis
that better reflects this highly regulated and “contrived” market. To understand the potential
threats by challengers and other contingencies, agencies must develop “market knowledge”
(Day, 1994): their approach to market participation must be modified by embedding new
knowledge about the market including customers, competitors, market trends and regulation
(Day, 1994; Lavie, 2006).

The development process

In the original consultancy project, the model that was developed was then used as a “can
opener” to begin to analyse significant shifts in a particular market where change and
opportunity could be linked to a specific event or series of events – that is to say, the evolution of
a social care market, in the context of widespread policy and demographic change.
It was agreed that the consultancy project would include the production of a business plan, and
the model then used as a tool to formulate a new business strategy for the service. The client
produced a think-piece entitled: “What success looks like”, outlining a number of tangible and
intangible outcomes for the future of the service. Using a range of secondary research, the
external drivers were analysed to provide a market and environment profile which was used to
inform the content of the business plan.
Much of the information was easily accessible and in the public domain, so accessing the
required data was straightforward and required very little primary research. However, while
registered social landlords (RSLs) have, for decades, been expected to conduct very detailed
and regular customer attitude testing, most customer surveys using the sector standard (the
STATUS survey) asked no questions about customers’ perceived needs for personal care.
Fortunately, public sector social care commissioners are also proactive around the collection
of customer data, and much of the evidence required could be extrapolated from population
data for this demographic.
At the end of the project, a sample interview was conducted with one of the new care customers
to test the assumptions developed from the data. Though a sample of one is hardly large, this
was a useful exercise, and may in the future be developed into customer focus groups as part of
a developed toolkit to enrich and validate the data.
The AHA scenario was also tested against SWOT (strengths, weaknesses, opportunities,
threats) and PESTLE (political, economic, sociological, technological, legal, environmental) as
alternative analytic tools. To provide contrast, the limitations and problems of both tools provided
useful learning and motivation to address these shortcomings within the model toolkit.

Existing tools
It has been argued (D’Aveni, 1994) that in hypercompetitive environments, performance is an
outcome of a continuous series of competitive actions. It follows that we must consider
the context and drivers of these actions. An updated contingency approach must include
the identification and satisfaction of those external drivers that, in this new kind of market, will
offer most value (both to the customer, stakeholders and to the company), differentiation
and product/service efficacy (Ulaga, 2003; Ittner et al., 2003; Huang et al., 2010; Mansfield and
Fourie, 2004; Neysen, 2008-2009).

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SWOT analysis (Ronco and Cahill, 2005) and PESTLE has, for many years, been the standard
approach for gathering information and surveying the internal and external factors impacting
upon an organisation. These and other strategic planning frameworks offer a useful approach in
taking a broad brush evaluation of the potential drivers for change, although the TOWS
approach (also termed situational analysis) appears to offer a more analytic approach as a
further level of evaluation, after SWOT has been completed. The rationale behind the use of
PESTLE is the need for companies to evaluate and position themselves within the wider “meso-
economic” and “macro-economic” environments in which they operate.
The precursor of other models (Porter’s five forces, the PEST analysis), the SWOT analysis, is used
with varying degrees of skill and analytical rigour (Ronco and Cahill, 2005; Hill and Westbrook, 1997).
It remains, however, one of the most popular and widely used analysis tools, particularly by non-
specialists. However, there are a number of difficulties with their use. As Ronco and Cahill established,
many practitioners were not using SWOT effectively. They, and other researchers, found that there
were a number of weaknesses in the approach which negates its value, if not used to its full potential.
For instance, problems arise with: the statistical insignificance of the numbers of participants (Ronco
and Cahill, 2005); the lack of prioritising of issues (Leigh, 2006), the generation of a plethora of ideas
without clear direction as to the significance of each (Takahashi and Maeno, 2010); its inability to deal
with multi-dimensional issues, so issues may be placed into the “nearest fit” rather than the most
appropriate category; the arbitrariness of the classification of issues into the categories (Dobes and
Bennett, 2010); the complete reliance on the skill and knowledge of the facilitator in the absence of
clear ground rules; the lack of information about the business impact of identified issues and the lack
of ability to determine whether some issues may be a strength or a weakness (Leigh, 2006):
However, the SWOT framework tells us that environmental analysis – no matter how rigorous – is only
half the story. A complete understanding of sources of competitive advantage requires the analysis of
a firm’s internal strengths and weaknesses as well (Barney, 1993, p. 49).

In contrast to a SWOT, PESTLE focuses on the wider environment, both currently and in the
predictable future, which may impact positively or negatively on the organisation, and is used to
inform longer term planning and strategic planning. However:
The most serious disadvantage for PEST is the whole analysis is a construct based on assumption
without any proof. Strategic planning based on unproven data about the organization or any of the
other elements is a high risk exercise (Dobes and Bennett, 2010).

In a dynamic environment, external drivers are continuously changing, and so require constant
monitoring for accuracy and change, having included a thorough analysis of current and future
change drivers (Day, 1990; Boeker, 1997; Baden-Fuller and Volberda, 1997; Walsh, 2005):
If a firm operates within a highly dynamic context, which requires constant changes in the product, its
competitive strategy will be enhanced by a flexible structure that makes these changes easier. With the
passing of time, that organizational design may be improved through a “learning-by-doing” process
(Nonaka and Takeuchi, 1995), thanks to which it will be possible to maintain the firm’s competitive
advantage over time. It may be possible for competitors to develop a similar organizational design, but
this normally takes time, and by then, a firm may have gone on to develop its skills further and to learn to
use them in different ways (Miller and Shamsie, 1996) (Pertusa-Ortega et al., 2010, p. 1294).

The new model

To recap, the social care market may be described as a “contrived” market, i.e. that public sector
providers have been forced into operating within an open market environment, whilst private
provision is relatively able to operate in a free-market way. While the entire market is regulated by
the Care Quality Commission, the dilemma for public sector agencies is that supplying exclusively
to publicly funded clients results in additional restrictions on trade by local authority commissioners,
whilst restrictions on public expenditure and the driving down of costs are restricting their financial
viability: a situation that is unrecognisable in other markets. In the longer term sales to the private
sector will almost certainly be required to achieve economies of scale and internal subsidy.
A RSL may initially have a significant advantage as an existing provider of a number of homes,
including those for older and vulnerable people in non-specialised accommodation. This “captive

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 audience” offers a ready market for domiciliary care, as long as the RSL is able to capitalise on
its good reputation and existing information about customer needs and preferences. This means
that investment in attracting private customers generates less urgency; and this may give rise to
some complacency.
At the close of the second paper, a number of attributes were identified as being necessary to
ensure that an updated contingency model can support effective strategic planning: equifinality;
prioritisation; diagnosis; balance; consistency; multi-directionality; and specificity. The External
Drivers Model that follows was developed, originally to assist AHA as part of a consultancy exercise,
and this consultancy project is used here as a case study, from which, we suggest, wider
generalisations can be drawn. This new model draws on a range of existing perspectives, including
(Ansoff, 1957a, b, 1963, 1964, 1965), the Change Kaleidoscope (Balogun and Hope Hailey, 2008),
the Cultural Web (Johnson et al., 2008) and McKinsey (Peters and Waterman, 1982).
In formulating a new approach to competitive advantage, the new model builds upon the
proposition that the established models of market orientation – customer orientation, competitor
orientation and interfunctional coordination (Narver and Slater, 1990) while valuable, fail to
recognise the impact of industry trends, technological advances and especially of regulation.
Thus, the new model identifies five external influences or drivers that the organisation must satisfy in
order to achieve market success. It does this by ensuring that each internal function meets these
external demands from the environment, whilst being aligned with each other. However, although the
model classifies the external drivers and internal responses into neat “boxes”, this is not to imply that
any or all are completely separate entities without influence or impact upon any or all of the others.
Whilst the capacity of the organisation to influence the macro-environment may be limited, the
External Drivers Model uses macro-economic information in combination with meso-economic
factors to inform strategic planning, as all these factors may directly restrict or increase the profitability
of the firm. Thus, by evaluating and planning against these environments, it is possible to maximise
commercial opportunities and minimise market threats, in full recognition of long-term trends.

External drivers (Figure 1)

Commercial organisations must balance customer and stakeholder demand: reconciling
best value and quality for customers with the appropriation of rents by suppliers/staff and

Figure 1 External Drivers Model

Market
conditions Industry
Regulation
trends

Customer/
Technological
stakeholder
advances
demand
Organisational
response leads to
market success

Structure Processes

Marketing Strategy
Culture

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maximised profits and growth and dividends for stakeholders. Meeting customer
requirements must, by necessity, be a central focus, as without customers, a business
does not exist.
Stakeholders are presented by a wide and diverse cohort: from shareholders in private
companies, to trustees in the charitable or third sector, and employees and representative or
professional bodies, all have a stake in the effective governance, operation, appropriation of
income and future growth and prosperity of the whole. Indeed, as we will see in the mobile
phone hacking example, stakeholders of the tabloid press included the government and
executive, who were reliant on the newspapers to champion their policies and to represent them
to the public in a positive light.
Market conditions may be influenced by local, national or international issues which have, or
have the potential, to impact upon companies’ ability to produce goods or services and to
generate profit and ultimately rent. This could include money supply, access to credit, interest
rates and global influences such as war and revolution, or more locally, competitor activity
(including tangible and intangible resources and attributes), changes in competitors, alternative/
substitute products and new entrants to the market.
Regulation incorporates all official external determinants of organisational behaviour, including
national and international legislation. It may be permissive or prohibitive, and once again,
requires balance between competing requirements.
Industry trends may have a stronger influence in some sectors than in others, but all
will have some level of impact. The rise in demand for personalisation of services and
products is increasingly requiring suppliers to develop customised products; the trend for
outsourcing has had a widespread influence both in internal functions (information
technology and human resources) and in customer-facing services being moved across
continents to save costs.
Technological advances may stimulate greater efficiency and more economical use of
resources, allowing for increased profits and growth, but conversely may put pressure on
product life cycle by speeding obsolescence and forcing heavy investment in research and
development. This can disadvantage smaller players and market entrants.

Internal responses
The organisational structure refers to the way that activity is organised: the hierarchical and
departmental frameworks are fundamental to the organisation’s response to external pressures.
The use of resources as framed through the structure (including staffing numbers and
deployment) always reflect the organisation’s priorities and the relative importance given to
different activities and the value of assets and resources.
The strategy details how the organisation plans to respond to external drivers, both pro-actively
and reactively, using the structure as a framework. It gives a framework and shared purpose to
the activities of staff, and uses existing and projected information to determine priorities and how
resources will be exploited, including provision for investment in human capital.
The culture of the organisation is the manifestation of its response to how it sees the world
around and within it: it reflects vision and values; how relationships work across the hierarchical
and departmental boundaries; how it views and behaves towards its customers, suppliers, staff
and other stakeholders. The appetite for change is part of its culture, as is its ambition for
excellence. Culture is not homogeneous, and informal sub-cultures will exist, but that there will
be one culture seeking dominance.
Processes are the detailed activities designed to deliver the strategic aims. Dependent on the
rigour of the regulatory context, the level of prescribed detail and capacity for individual
judgement is determined by the complexity of the required outputs and outcomes. These
processes are as important as structure and strategy, as they signal the practical deployment of
resources: without effective research and development based on knowledge and insight around
market trends, product development will be unable to respond appropriately.

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 An organisation’s marketing is the image of itself that it wishes to present, both to the external
market, but also to staff and stakeholders. More than just advertising and publications, it
includes all interactions between the company and potential or actual customers, suppliers and
stakeholders. The veracity of the message and how closely it accords with the “feel” of the
company to stakeholders and staff may influence how positively (or conversely, how cynically)
those individuals view the organisation.
Marketing needs to be balanced with product development and output capacity: highly
successful marketing that is not backed up with a good product and the ability to meet demand
will represent wasted resources.

Testing the model

The inclusion of technological advances as a separate external driver was increasingly
challenged during application of the model to business planning. Its emphasis within
existing literature as a situational variable within contingency theory (Donaldson, 2006;
Moreno-Luzón and Peris, 1998; Woodward, 1965; Burnes, 1996) was the inspiration behind
its inclusion in the model. However, it was not found to be of sufficient significance in application
for this specific sector or service: as a particularly personal-interactional service, technology
is used in social care only on the periphery as an enabling facility, rather than a means of
production. In spite of this, and on balance, this driver was retained within the model to maintain
its potential applicability to other types of services/operations where technology may be of
greater consequence.
Organisational Learning proved to be particularly pertinent when considering the “customer/
stakeholder requirements”, “market conditions” and “industry trends”, and their continuing
impact on operations and strategic direction: unlike legislation and regulation (where regulators
and other external bodies will always issue alerts of new measures), changes in dominating logic
or shifts in the market, industry or customer needs can go unnoticed, resulting in loss of fit and
potential loss of differentiation and market presence.
People: their deployment, development and human capital are fundamental to orientating an
organisation towards competitive dominance. They drive and develop core competencies,
strategise and determine direction.
Learning refers to the agency’s capacity to gather information about its environment, analyse
and apply it effectively in strategic and operational issues. This not only encompasses
awareness of externalities (i.e. being an outward facing organisation) but also how it creates and
shares knowledge both internally and externally to drive excellence.
It was also clear that individual external drivers are not impervious to influence by companies,
either individually or collectively: in dynamic market conditions, drivers are subtly or overtly
altered by agencies and each other. For instance, Apple’s iPod has driven the agenda in
personal music players and facilitating technology, and transformed the market, customer
demand, and research and development for the future. The causal links between the
organisation and the external drivers thus needed to be redrawn to reflect a two-way influence.

Prioritising between drivers

AHA’s usual approach to strategic planning (as confirmed through examination of archive
materials) evidenced the significance of analysis and prioritising strategic activities to make best
use of limited resources. Thus, to prevent the External Drivers Model becoming just another
method for listing environmental influences without analysis, it was necessary to consider a
number of approaches to prioritising those drivers with the greatest potential to elicit value from
an organisation, and ensuring that responses were aligned in line with the model.
Customer requirements are generally, though not inevitably, in conflict with stakeholder interests,
because they demand low prices and generous staffing levels, whilst stakeholders may require
the organisation to maximise its profits, and to acquire a larger proportion of the rents.
Simultaneously, legislation and regulation should promote the customer’s interests, while current

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market conditions are suppressing prices and industry trends are maintaining high-quality
standards. Technological advances, in the form of assistive technology, are enabling customers
to live independently and in safety.
The only absolute external driver that could not be balanced by others is legislation and
regulation. All other combinations can be adjusted. Whilst this shows the flexibility of the model,
it does not assist the user to prioritise between different drivers.
In order to proceed, it became clear that it was more useful to bundle various options
together as packages. Foremost of these were the values creation approach, and the risk-based
approach. In practice, the risk-based, damage limitation prioritising was found to be the
most clear and objective of the competing options, though both are presented here, to illustrate
the strengths of each.

The value creation approach

The basis of this approach was to determine which internal responses to which external drivers
would potentially add the most financial value to the service: clearly a high priority in any
commercial activity.
This approach is based on the following assumptions:
’ that any responses that enable the organisation to meet customer requirements will add the
most value to the product, by maximising its attractiveness to the market;
’ that in a non-shareholding organisation, stakeholder interests are generally non-pecuniary,
and therefore promoting their interests, although important, will not add much value (£),
however, as this diverse group includes staff, whose primary reward is financial, this is
increased to a medium rate of added value (££);
’ that meeting legislation and regulation requirements is a business expense, and thus will not
add financial value, other than by the avoidance of potential financial penalties;
’ that responding to market conditions, i.e. by attempting to gain competitive advantage
through differentiation or cost leadership (where possible) or early mover advantages through
innovation will add the most value;
’ that following industry trends will only prevent competitive disadvantage and thus will add
little value to the service; and
’ that informed and innovative use of technological advances may achieve differentiation or
reduce costs, and therefore add value to the service.
Again, in practice, the prioritising by value creation was found to be clear and objective, but failed
to offer the capacity to offer clear gradations of priority.

The risk-based approach

Mirroring the established impact/probability method of classifying risk, the matrix was designed
during the research process to assist in determining which environmental drivers will have the
greatest impact and upon the organisation, against which will be the most expensive, time
consuming and require the greatest amount of buy-in from internal and external stakeholders
(and thus may necessitate investment of additional resources). The matrix assumes that all
external drivers represent some level of threat to the organisation, and therefore require an
appropriate and proportionate level of response.
The principle of using a risk-based model of analysis was logical in the context of business
planning, which must be allied to an appreciation of the potential threats to organisational
survival/success. However, combining multipliers on impact (how long the driver would take to
impact and its scope across the organisation) and capacity to respond (amount of time and
resource investment and level of required buy-in) was found initially to have reduced the
accuracy and focus of this approach. For instance, an external driver could impact swiftly and
strongly within an organisation, whilst only affecting a minor process or small group of

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 individuals. How, then, should this be scored? Experienced users of the impact/probability
approach will generally use “worst case scenario” and score it as a significant threat, but this
could be open to interpretation.
It was also clear in using this approach that a scoring range of 1-9 was probably not
detailed enough, and that to ensure finer gradation, a wider range of multipliers should be
used. This was evidenced by the similar scores generated by diverse factors, which, on
examination, were shown to be the result of quite different multipliers, but with the
superficial appearance of similar degrees of significance or priority. Very clear criteria for
scoring different drivers and responses within the model were fundamental to ensuring
specificity of measurement.
However, with some further development, this approach, in combination with the other analysis
tools detailed above, offers a sound theoretical basis on which to analyse information prior to
undertaking business planning.
Thus, the Risk Management Approach was found to be the most sensitive in use, and therefore
offered the best capacity to determine clear priorities for internal responses.
Once the drivers were prioritised, a business planning matrix was used provide a framework
within which to identify which activities/functions/structures to be implemented.

Using the model as an analysis tool

The model may be used as a “can opener” to begin to analyse significant shifts in a particular
market where change may be linked to a specific event or series of events. As an illustration,
demonstrating this wider applicability, let us briefly consider the 2012 case of mobile phone
“hacking” by UK tabloid newspapers.
Here, covert strategies to gain access to confidential information about well-known individuals
used people and processes to break the law in order to gain a news advantage. This was
permitted by internal culture within individual players that emphasised the attainment of business
objectives (i.e. new and better stories than rivals) over any other consideration, and was driven by
fiercely competitive market conditions and industry trends towards sensationalism, customer
demand for ever more titillating stories, loose regulation by the Press Complaints Commission
(possibly at the behest of stakeholders within the government and executive, who had their own
motivation for tabloid success), technological advances that enabled the capability to access
mobile phone mailboxes and a spread of these practices by internal and external learning.
Marketing ensured that customer interest in “celebrity” and sensational stories was both
stimulated and satisfied, by positioning the product as “public interest”.
In the furore that followed, there was great stress on improved regulation. This shows how some
external drivers may both be changed fundamentally and have strong influence as change
agents (in this case, customer and stakeholder demands will be primary, followed by regulation),
whereas others (such as technological change) may be driven by others (for instance by
increasing the security features in future models of mobile phones).
Given the strong market orientation of the industry and the drive for profit, cultural change would
depend on whether customer attitudes towards sensationalism and titillation have altered
significantly. It is possible that whilst the general public felt and expressed a level of disgust at the
revelations, the attitudes of loyal customers may not have changed sufficiently to effect lasting
change, and such practices may well re-emerge over the long term.

Conclusions and research contribution

Reflections on the topic

The External Drivers Model developed out of a lack of applicability of existing theoretical
perspectives to a changed social care market: the original theoretical position changed once
again as the model was tested in an operational setting, with additional complexity of approach

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incorporated into the final model. The final External Drivers Model offers a theoretical model of
the essential forces in the contrived social care market.
Whilst the model is based on sound theory around competitive advantage and contingency
theory amongst others, a deliberate attempt was made to design a practical business tool
without unnecessary background detail. Further developments of the model could link to useful
background and theoretical data, and to ensure an evidential audit trail, the business plan will
include all substantiating information.

Using the model to plan for change

The business planning matrix linked to the model offers one perspective on what a change
strategy should be trying to achieve, within this External Drivers Model. Each block within the
matrix details the desired outcome within each internal element as it is influenced by the external
driver. Having undertaken a gap analysis, a change management strategy using this model will
prescribe, in some detail, the approach required to achieve the required outcome in each
element. As a tool for change or business planning, the model provides the data and direction to
power a market orientation strategy.
The most time consuming part of applying the External Drivers Model was the translation of
diverse data into findings to support the proposals within the business plan. As the application
of the model was developmental, it was not possible to exactly measure the required time
investment to produce a comprehensive plan. To ensure comprehensive internal ownership, use
of the model by organisations will require involvement and consultation across a range of internal
and external stakeholders and customers: this will necessarily last for some months to ensure
the most valuable outcome.

Implications for future research/development

With increasing numbers of formerly non-profit organisations considering the delivery of integrated
care within a new social care market, many agencies are entering completely new operating
environments and attempting to compete with long established players. This research study offers
a new perspective on how and why established ideas on achieving competitive advantage may
not enable them to achieve commercial success. Instead, it addresses the issues identified in the
critical analysis, in order to enable them to take a practical approach to business planning.
The model developed from early inception, through the literature review and critical analysis,
to testing of a prototype model through constructive research and to the final version illustrated
above. However, within the constraints of this research it was not possible to re-evaluate this
latest output, and thus further research is required to establish its credibility and generalisability
to other agencies and markets.

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Patricia Dearnaley can be contacted at: pdearnaley@btinternet.com

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