An environmental analysis in strategic management plays a very important role in businesses by pinpointing current and potential opportunities or threats outside the company in its external environment. The external environment includes political, environmental, technological and sociological events or trends that can affect the business directly or indirectly.
The main objective in this report is an environmental analysis using all the factors and analyzing tools , generally conducted as part of an analysis of strengths, weaknesses, opportunities, and threats (SWOT) when a strategic plan is being developed. Managers practicing strategic management must conduct an environmental analysis quarterly, semi-annually, or annually, depending on the nature of the business’s industry focusing on the followings: Analyzing factors effectiveness on our organization as one of the biggest group in the healthcare services in the region. Organization sources and competitors.
Organization values chain construction.
SWOT analysis evaluation.
Ref: http://www.wisegeek.com/what-is-the-role-of-environmental-analysis-in-strategic-management.htm , 2014
3.ANALYSING FACTOR EFFECTIVENESS:
3.1 Macro Environment Analysis:
One of the best tools for considering trends in the Macro environment is the PESTEL analysis. (Figure 1)
Since we are located here in the UAE, we have no taxation and this is one of the strength point we are depend on. but at the same time our administration team not recognizing that the minimum wages should be increased comparing
with the other facilities and hospitals in our region as a big competitors.
Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm’s cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy.
And since our organization as privet health care facility, based on the profit rate it takes in the consideration all these factors especially after it involved in the stock market last year. Beside that the new plan is to minimize the expenses that related to the interest & exchange rate by following the centralization policy. ex. making one laboratory for all branches with a very controlled transportation system for sending the patients samples to the centralized laboratory instead of having a separate laboratory in each branch
Our organization as one of the privet hospitals in the region , is giving all the healthy activities, health care providing, never giving any changing as a demographic trends. We are doing outside activities supporting some certain people those who have a chronic disease like the diabetic patients to have more and more knowledge about themselves and how to take care about it. Ref(CBS course , topic 2 , page # 5)
We are depending on the development of new technology to maintain competitiveness. Ex(opening new department of the Nuclear medicine for early Cancers diagnostics )
factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones. Ref http://en.wikipedia.org/wiki/PEST_analysis
According to our national regulations and environmental roles ,we are following the EHSMS(Emirates Health & Safety Management System).
3.1.6 Legal include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.
The services in the hospital is the same for all patients and the priority is only for the urgent and emergency cases only not according to the nationality, color or any other discrimination issues. And on the other side there is a special track for the VIP patients ,giving the best quality to be the first choice in the region as a privet hospital.
3.2 Micro Environment Analysis:
One of the best tools for considering trends in the Micro environment is the porter analysis. (Figure 2)
Porter five forces analysis is a framework for industry analysis and business strategy development. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An “unattractive” industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching “pure competition”, in which available profits for all firms are driven to normal profit. This analysis is associated with its principal innovator Michael E. Three of Porter’s five forces refer to competition from external sources. The remainder are internal threats.
3.2.1 Threat of Substitute Products or Services:
A substitute is a product that performs the same or similar function as another product. Microeconomics teaches that the more substitutes a product has, the demand for the product becomes more elastic. Elastic demand means increased consumer price sensitivity which equates to less certainty of profits. For example, public-transportation is a substitute for driving a car, and e-mail is a substitute for writing letters. Conditions that increase the threat of substitutes are: 18.104.22.168 An attractive price of substitutes: Our organization as a privet health care facilty depends on the insurance companies in how much they are fixing the prices of the services and products, but they are trying to do some marketing using special prices for the labors in some company by doing full checkup examination for those people who don’t covered by insurance.
22.214.171.124 Increased quality of substitutes: Our facility is trying to give the best quality to be the first choice in the region in the privet health care sector. Focusing more and more to follow the highest international standards like the JCIA (Joint Commission of international accreditation) ,CAP(Collage of American Pathologist) and the ISO ..Etc 126.96.36.199 Low switching costs to consumers: our Administration is not switching the cost to the consumers since they are covered by health insurance. But sometimes they are switching the costs to the staff by minimizing the staff without enough study to the work load or stopping the annual increments.
3.2.2 . Threat of Entry:
Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents (which in business refers to the largest company in a certain industry, for instance, in telecommunications, the traditional phone company, typically called the “incumbent operator”), the abnormal profit rate will trend towards zero (perfect competition). The following factors can have an effect on how much of a threat new entrants may pose: The existence of barriers to entry (patents, rights, etc.). The most attractive segment is one in which entry barriers are high and exit barriers are low. Few new firms can enter and non-performing firms can exit easily. Government policy
Cost disadvantages independent of size
Economies of scale
Economies of product differences
Switching costs or sunk costs
Access to distribution
Customer loyalty to established brands
Industry profitability (the more profitable the industry the more attractive it will be to new competitors)
Rivalry Between Established competitors:
Rivalry refers to the degree to which firms respond to competitive moves of the other firms in the industry. Rivalry among existing firms may manifest itself in a number of ways- price competition, new products, increased levels of customer service, warranties and guarantees, advertising, better networks of wholesale distributors, and so on. The degree of rivalry in and industry is a function of a number of interacting structural features: Rivalry tends to intensify as the number of competitors increases and as they firms become more equal in size and capability. Market rivalry is usually stronger when demand for the product is growing slowly. Competition is more intense when rival firms are tempted to use price cuts or other marketing tactics to boost unit volume. Rivalry is stronger when the costs incurred by customers to switch their purchases from one brand to another are low.
Market rivalry increases in proportion to the size of the payoff from a successful strategic move. Market rivalry tends to be more vigorous when it costs more to get out of a business than to stay in and compete. Rivalry becomes more volatile and unpredictable the more diverse competitors are in terms of their strategies, their personalities, their corporate priorities, their resources, and their countries of origin. Rivalry increases when strong companies outside the industry acquire weak firms in the industry and lunch aggressive, well-funded moves to transform their newly-acquired firms into major market contenders.
Two principles of competitive rivalry are particularly important: (1) a powerful competitive strategy used by one company intensifies competitive pressures on the other companies, and (2) the manner in which rivals employ various competitive weapons to try to outmaneuver one another shapes “the rules of competition” in the industry and determines the requirements for competitive success. Since our hospital is the biggest hospital in the area, it depends in the competition on increasing the branches in all areas inside and outside the city for more than 8 branches directed by the corporate office in the Capital.
3.2.4 Bargaining Power of Customers:
188.8.131.52 Markets for Outputs:
Selling goods or services to customers (distributors, customers or other manufacturers) Customers’ influence dependent upon importance of products to them & their bargaining power We have a marketing team of 4 members working under the supervision of the corporate office , handling all the outputs issues like : the chronic patients disease health care activates offering free of charge checkup (ex. diabetic patients..)
184.108.40.206 Markets for Inputs:
Purchasing raw materials, components and financial & labor services. The same team also cooperating with the purchasing department together working to get the best quality materials for the lowest prices in order to minimize the costs. And that will allow the hospital to give more best services more than the other competitors.
3.2.5 Bargaining Power of Suppliers:
The power balance between organization and supplier is similar to the relationship between organization and customer The organization becomes the customer and the producer of the inputs it requires are the suppliers Some small groups of suppliers may form cartels or cooperatives to increase their bargaining strength Suppliers use leverage such as threats to raise prices or reduce quantity or quality of goods they supply
We are depending on the process comparison in the market and to services the suppliers will provide to us. In the opposite side, we are a customer for the suppliers and since we are the biggest customer in the privet sector we can manage the deal according to our needs.
Formulating is phase one in the strategic planning process and according to the diagram below We can see that it plays a very important in taking the best decisions and actions to achieve the objective of the organization. In our hospital there are many plans in how to make all these decisions become a real. At the beginning of each new year , we are making our plan projects for the next 12 months And everyone have to achieve his planed objectives as individual under the umbrella of the administration and corporate office objectives. And at the end of the year will have an assessment to check how many objectives he reached , according to his work assessment will get his increment , so that will let him work harder during the year to achieve the organization objectives.
Ref(CBS course , topic 1 , page #12).
3.3.1 Organization sources and competitors :
Our hospital sources is strong enough to be a strong competitor in the market depending on: Best medical companies as materials providers. Best marketing plans based on the corporate marketing plans. Patients (as a customers ): Accepting all the insurance cards at the time that some other hospitals don’t accepting all patients.
3.3.2 Organization value chain construction
Value chain is a template that identifies the activities of a company from raw materials to customer, the value added by each activity and the cost of each activity, and that facilitates implementation of business-level strategy . Ref ( CBS Strategic Management Topic 3 Page#6)
The axiom is true that you never get a second chance to make a good first impression, and hospitals have many opportunities to do so. Or not. At several junctures along the trek of accessing services, the patient confronts a series of opportunities to continue in the system or not, based on the success of the interaction. These touchpoints are not created equal, and it is important to know which has the greatest impact. Here, we can focus the Service Line Growth strategy. As a tool to understand the impact of each touchpoint, value-chain service analysis maps the process to help us decide where to focus strategic intent. Hospital business planning adapts a model developed by Michael Porter, who defines the value chain as a means to analyze an organization’s strategically relevant activities to understand how to influence performance and cost.
He breaks the activities of the firm into primary and support activities. Primary activities—which, for most firms involves inbound and outbound logistics, operations, sales and marketing—are supported by an infrastructure of underlying support activities, including HR, IT, and purchasing. How the product or service is ultimately developed and delivered to the customer depends on the effective interaction of these variable activities. The hospital value chain is diverse and complex. Our service offerings are far from clear cut, varying sharply between service lines. Each specialty and disease category has a distinct value chain to be flowcharted and analyzed prior to understanding where we can impact choice by creating value. In most cases this is at the physician referral point where patients make initial decisions.
This may be a primary care physician or a specialty care physician who is directly involved in managing the hospital encounter. In most cases, it is the loyalty of the physicians and their attitude towards the hospital that determines the direction of the process. This analysis is a good tool for getting stakeholders on the same page. It helps focus planning efforts and gets to the key issue of where to go and what to do. This leads us to the question—what business are we in, and where do we strategically want to focus our efforts, which is the essence of strategy.
4.1 Strengths (Internal Factors)
The hospital key strengths are the following:
Long Standing Reputation – was the previous monopoly Company in the industry Government Affiliated – trusted in the Market
Most skilled employees in the industry – generated good client relations
4.2 Weaknesses (Internal Factors)
The main functional areas of weakness are the following:
Production Costs – in comparison to competitors
Profit Margins – in comparison to competitors
Service Delivery – poor operational functions
Loss of Contracts – lack of continual Contract retention
Company Culture – disconnected, divided, tall organisation structure HR Policies & Procedures – poor employee retention, lack of career development, low morale Lack of MIS – no common management information systems in place across functions. Brand Identity/Image – lack of Marketing department
The main objective is the consideration of the external and internal analyzing factors, using all the analyzing tools and studies like: PORTER, SWOT and all other analyzing international methods.
This report explained clearly the essential required methods for analyzing using the practical example of my organization (Privet Hospital), how to make the competitive advantages and how to use all the efforts to get the best analyzing results. After the analyzing how can we use our strength points to be the first choice in the market and how to correct the weakness points to avoid any problem in the future.
In the light of the above there are essential factors which might be affecting in any organization , so we have to cover all the points that I mentioned about it before like :
Analyzing factors effectiveness on our organization as one of the biggest group in the healthcare services in the region. Organization sources and competitors.
Organization values chain construction.
SWOT analysis evaluation.
http://www.wisegeek.com/what-is-the-role-of-environmental-analysis-in-strategic-management.htm , 2014 (http://en.wikipedia.org/wiki/PEST_analysis) , 2014
CBS course , topic 2 , page # 5 , 2014
http://en.wikipedia.org/wiki/PEST_analysis , 2014
http://www.oshad.ae/en/sectors/healthsector/Pages/ehsmsrequirements.aspx, 2014 http://www.dineshbakshi.com/igcse-business-studies/external-environment/revision-notes/63-external-environment-factors, 2014 http://en.wikipedia.org/wiki/Porter_five_forces_analysis ,7 March 2014) http://en.wikipedia.org/wiki/Porter_five_forces_analysis#Threat_of_new_entrants, 2014 http://www.strategy-formulation.24xls.com/en114
CBS course , topic 2 , page #17 , 2014
CBS course , topic 2 , page #20 , 2014
CBS course , topic 1 , page #12 , 2014
CBS Strategic Management Topic 3 Page#6 , 2014
http://healthcarestrategicadvantage.blogspot.ae/2007/11/value-chain-analysis.html , 2014 Strategic Management Unit 306 (CBS) , 2014